<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 35
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 35
The Flex-funds
(Exact Name of Registrant as Specified in Charter)
P.O. Box 7177, 6000 Memorial Drive, Dublin, Ohio 43017
(Address of Principal Executive Offices-Zip Code)
Registrant's Telephone Number, including Area Code: (614)766-7000
Commission File No. 2-85378
Commission File No. 811-3462
Donald F. Meeder, Secretary - R. Meeder & Associates, Inc.
P.O. Box 7177, 6000 Memorial Drive, Dublin, Ohio 43017
(Name and Address of Agent for Service)
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
It is proposed that this filing will become effective (check
appropriate box).
/XXX/ immediately upon filing pursuant to paragraph (b) of Rule 485
/ / on pursuant to paragraph (b) of Rule 485.
/ / 60 days after filing pursuant to paragraph (a)(1).
/ / on (date) pursuant to paragraph (a)(1).
/ / 75 days after filing pursuant to paragraph (a)(2).
/ / on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
/ / This post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
Indefinite number of shares registered under Rule 24f-2 by filing of a
Pre-Effective Amendment No. 1, effective July 28, 1983. The 24(f)-2 Notice for
the fiscal year ended December 31, 1995, was filed with the Commission on
February 14, 1996.
The Growth Stock, Mutual Fund, Bond, Money Market, Short-Term Global and
Utilities Stock Portfolios have also executed this Registration Statement.
<PAGE> 2
THE FLEX-FUNDS
CROSS REFERENCE SHEET TO FORM N-1A
FOR THE GROWTH FUND, THE U.S. GOVERNMENT
BOND FUND, THE MONEY MARKET FUND, THE MUIRFIELD
FUND AND TOTAL RETURN UTILITIES FUND
Part A.
Item No. Prospectus Caption
<TABLE>
<S> <C>
1 Cover Page
2 Highlights
Synopsis of Financial Information
3 Financial Highlights
4 The Trust and its Management
Investment Objectives and Policies
Additional Investment Policies of the Growth Stock, Mutual Fund,
Bond and Money Market Portfolios
Additional Investment Policies of the Utilities Stock Portfolio
5 The Trust and its Management
5A Performance Comparisons
6(a) Other Information - Shares of Beneficial Interest
6(b) Not applicable
6(c) Other Information - Shares of Beneficial Interest
6(d) Not applicable
6(e) Highlights
6(f)(g) Income Dividends, Capital Gains, Distributions and Taxes -- The Growth
Stock, Mutual Fund, Bond and Money Market Portfolios
Income Dividends, Capital Gains, Distributions and Taxes -- Utilities Stock
Portfolio
6(h) Cover Page
Other Information - Investment Structure
7(a) Not applicable
7(b) How Net Asset Value is Determined
7(c) Exchange Privilege
Flex-funds Retirement Plans
Other Shareholder Services
7(d) How to Buy Shares
7(e)(f) Distribution Plans
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
8(a) How to Make Withdrawals (Redemptions)
8(b) Not applicable
8(c) Shareholder Accounts
8(d) How to Make Withdrawals (Redemptions)
9 Not applicable
</TABLE>
<PAGE> 4
THE FLEX-FUNDS
6000 Memorial Dr. Dublin, OH 43017
800-325-FLEX 614-766-7000
THE FLEX-FUNDS ARE A FAMILY OF MUTUAL FUNDS ORGANIZED AS A BUSINESS TRUST
(THE "TRUST") CONSISTING OF FIVE SEPARATE PORTFOLIOS (THE "FUNDS"), EACH OF
WHICH HAS SEPARATE INVESTMENT OBJECTIVES AND POLICIES.
THE TRUST SEEKS TO ACHIEVE THE INVESTMENT OBJECTIVE OF EACH FUND BY
INVESTING ALL OF THE INVESTABLE ASSETS OF A FUND IN A CORRESPONDING OPEN-END
MANAGEMENT INVESTMENT COMPANY HAVING THE SAME INVESTMENT OBJECTIVE AS THAT FUND
(EACH A "PORTFOLIO" AND COLLECTIVELY THE "PORTFOLIOS"). ACCORDINGLY, INVESTORS
SHOULD CAREFULLY CONSIDER THIS INVESTMENT APPROACH. FOR ADDITIONAL INFORMATION
REGARDING THIS UNIQUE CONCEPT, SEE "INVESTMENT OBJECTIVES AND POLICIES" ON PAGE
17 AND "OTHER INFORMATION SHARES OF BENEFICIAL INTEREST AND INVESTMENT
STRUCTURE" ON PAGE 38 AND 39.
Each Portfolio places a high degree of importance on maintaining and
protecting portfolio values from adverse market conditions. Consequently, each
Portfolio employs flexible investment strategies.
There are no commissions, fees or charges for the purchase or redemption of
shares, although the Trust has adopted Rule 12b-1 distribution plans to aid in
the distribution of shares. (See "Distribution Plans".)
FLEXIBLE INVESTMENT STRATEGIES
Any of the five Portfolios may be invested defensively, for temporary
periods, if the Portfolio's investment adviser deems it advisable because of
adverse market conditions. A defensive position will be adopted in a manner
which the investment adviser considers to be most consistent with the
Portfolio's objective, policies and restrictions.
ADDITIONAL INFORMATION
This Prospectus sets forth basic information about the Trust and the five
Funds that a prospective investor should know before investing and it should be
retained for future reference. A STATEMENT OF ADDITIONAL INFORMATION, dated
April __, 1996, has been filed with the Securities and Exchange Commission and
is incorporated herein by reference. The Statement of Additional Information is
available upon request and without charge by contacting the Trust at the address
given above or by calling: 1-800-325-FLEX, or (614) 766-7000.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
1
<PAGE> 5
THE FIVE FLEX-FUNDS AND
THEIR INVESTMENT OBJECTIVES
THE GROWTH FUND
THE GROWTH FUND'S objective is long-term growth of capital through
investment in a portfolio of common stocks consisting of two representative
groups; one comprised of large capitalization stocks, the other of small
capitalization stocks. At times, the Fund may be invested more heavily in one
group than in the other.
THE MUIRFIELD FUND
THE MUIRFIELD FUND'S objective is growth of capital through investment in
the shares of other mutual funds.
THE TOTAL RETURN UTILITIES FUND
THE TOTAL RETURN UTILITIES FUND'S objective is to seek a high level of
current income and growth of income by investing primarily in equity securities
of domestic and foreign public utility companies.
THE U.S. GOVERNMENT BOND FUND (formerly, the Bond Fund)
THE U.S. GOVERNMENT BOND FUND'S objective is to maximize current income
through investment only in securities which are issued, or guaranteed as to
payment of principal and interest, by the U.S. government or any of its agencies
or instrumentalities.
THE MONEY MARKET FUND
THE MONEY MARKET FUND'S objective is current income and stable asset values
through investment in a portfolio of money market instruments.
This Fund will seek to maintain a constant net asset value of $1 per share,
although there is no assurance it will be able to do so. Investments in Fund
shares are neither insured nor guaranteed by the U.S. Government.
INVESTMENT ADVISER: R. MEEDER & ASSOCIATES, INC.
PROSPECTUS APRIL __,1996
2
<PAGE> 6
HIGHLIGHTS
INVESTMENT OBJECTIVES: The Flex-funds (the "Trust") is a mutual fund with five
portfolios (the "Funds") each with separate investment objectives and policies.
See "Investment Objectives and Policies."
LIQUIDITY: The Trust is an open-end investment company in that each Fund
continuously offers and redeems shares of beneficial interest at next
determined net asset value per share. See "How to Buy Shares" and
"How to Make Withdrawals (Redemptions)."
DIVERSIFICATION: Four of the Trust's five Funds are diversified. In The Money
Market Fund no more than 5% of the Portfolio's assets may be invested in
securities issued by a single issuer. The Growth, Total Return Utilities and
U.S. Government Bond Funds are diversified because 75% of the assets of each
Fund's Portfolio is restricted by the following rules: (1) No more than 5% may
be invested in the securities of a single company and (2) a Portfolio may not
purchase more than 10% of any company's outstanding voting securities. The
Muirfield Fund is by definition a non-diversified Fund. Its Portfolio may invest
more than 5% in the securities of a single company and may invest all of its
assets in the shares of other mutual funds.
NO SALES OR REDEMPTION CHARGES: There are no commissions, fees or charges for
the purchase or redemption of shares. See "Synopsis of Financial Information,"
"How to Buy Shares" and "How to Make Withdrawals (Redemptions)."
RETIREMENT PLANS AND OTHER SHAREHOLDER SERVICES: The Trust offers retirement
plans, which include a prototype Profit Sharing Plan, Money Purchase Pension
Plan, Salary Savings Plan --401(K), Individual Retirement Account (IRA),
Simplified Employee Pension (SEP), and a number of other special shareholder
services.
MINIMUM INVESTMENT: A minimum investment of $2,500 is required to open an
account, except an IRA account, for which the minimum is $500. Subsequent
investments must be at least $100. The Trust has the right to redeem the shares
in an account and pay the proceeds to the shareholder if the value of the
account drops below $1,000 because of shareholder redemptions. The shareholder
will be given 30 days' written notice and an opportunity to restore his account
to $1,000 ($500 for an IRA). See "How to Buy Shares," "Other Shareholder
Services" and "Shareholder Accounts."
INVESTMENT ADVISER, MANAGER AND SUBADVISER: R. Meeder & Associates, Inc. is the
Portfolios' Investment Adviser and Manager (the "Investment Adviser" or the
"Manager"). The Manager has been an Investment Adviser to individuals,
retirement plans, corporations and foundations since 1974. Miller/Howard
Investments, Inc. is the subadviser (the "Subadviser") to the Utilities Stock
Portfolio. The Subadviser has been an investment adviser to broker-dealers,
investment advisers, employee benefit plans, endowment funds, foundations and
other institutions and individuals since 1984. See "The Trust and Its
Management."
3
<PAGE> 7
DISTRIBUTION PLAN: The Funds have adopted distribution plans in accordance with
Rule 12b-1 under the Investment Company Act of 1940. Under these plans, in The
Growth, Muirfield, U.S. Government Bond and Money Market Funds as much as 2/10
of 1% of each Fund's average net assets may be paid annually to aid in the
distribution of shares. In The Total Return Utilities Fund as much as 25/100 of
1% may be paid annually to aid in the distribution of shares. See "Distribution
Plans."
HOW TO BUY SHARES: Complete the New Account Application and forward with payment
as directed. Orders accompanied by payment (ordinary check, bank check, bank
wire, and money order for The Growth, Muirfield, Total Return Utilities and U.S.
Government Bond Funds) are accepted immediately and priced at the next
determined net asset value per share after receipt of the order by Mutual Funds
Service Co., the transfer agent for the Funds, or the Funds' authorized service
agent or sub-agent. Investments in The Money Market Fund are priced at the net
asset value next determined after an order is received provided Star Bank, N.A.,
(the "Bank"), the Custodian for the Fund, receives federal funds that same day.
See "How to Buy Shares."
SHAREHOLDER INQUIRIES: Shareholder inquiries should be directed to the Trust by
writing or telephoning the Trust at the address or telephone number indicated on
the cover page of this Prospectus. To protect the confidentiality of shareholder
accounts, information relating to a specific account will be disclosed pursuant
to a telephone inquiry only if the shareholder identifies the account by account
number or by the social security number listed on the account.
SYNOPSIS OF FINANCIAL INFORMATION
<TABLE>
<CAPTION>
FUND
------------------------------------------------------------
TOTAL U.S.
RETURN GOVERNMENT MONEY
GROWTH MUIRFIELD UTILITIES BOND MARKET
<S> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed
on Purchases none none none none none
Maximum Sales Load Imposed
on Reinvested Dividends none none none none none
Deferred Sales Load none none none none none
Redemption Fees none none none none none
Exchange Fee none none none none none
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
Management Fees --
Net of Fees Waived* 1.00% 0.86% 1.00% 0.26% 0.15%
Distribution Plan
(12b-1 Fees)** 0.13% 0.13% 0.10% 0.17% 0.08%
Other Expenses (After Expense
Reimbursements)* 0.51% 0.27% 0.15% 0.57% 0.17%
</TABLE>
4
<PAGE> 8
<TABLE>
<CAPTION>
FUND
------------------------------------------------------------
TOTAL U.S.
RETURN GOVERNMENT MONEY
GROWTH MUIRFIELD UTILITIES BOND MARKET
<S> <C> <C> <C> <C> <C>
TOTAL FUND OPERATING
EXPENSES (NET OF FEES
WAIVED AND EXPENSE
REIMBURSEMENTS)* 1.64% 1.26% 1.25% 1.00% 0.40%
</TABLE>
EXAMPLE
An investor would pay the following expenses on a $1,000 investment,
assuming (1) a 5% annual return and (2) redemption at the end of each time
period.
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
The Growth Fund $17 $52 $89 $194
The Muirfield Fund $13 $40 $69 $152
The Total Return Utilities Fund $13 $40 N.A. N.A.
Net of Fees Waived and
Expenses Reimbursed*
The U.S. Government Bond Fund
Net of Fees Waived* $10 $32 $55 $122
The Money Market Fund
Net of Fees Waived
and Expenses Reimbursed* $ 4 $13 $22 $ 51
</TABLE>
*Expenses used in these illustrations summarize expenses actually incurred
for each Fund and its proportionate share of expenses from its corresponding
Portfolio for the year ended December 31,
1995.
During the year ended December 31, 1995 the Investment Adviser waived
management fees in The U.S. Government Bond and Money Market Funds and
reimbursed expenses in The Money Market and Total Return Utilities Fund in order
to reduce the operating expenses of these Funds. Expenses shown as "Net of Fees
Waived and Expense Reimbursements" are based on actual fees paid by those Funds.
Had management fees not been waived and expenses not reimbursed, Total Fund
Operating Expenses, as a percentage of average net assets, would have been as
follows: The U.S. Government Bond Fund 1.14%; The Money Market Fund 0.64%; and
The Total Return Utilities Fund 4.35%.
The Investment Adviser presently intends to waive a portion of its
management fees in each respective Portfolio to the extent necessary to keep the
expenses of The U.S. Government Bond Fund at or below 1% of average net assets
in 1996; to waive a portion of its management fee in the Money Market Portfolio
or reimburse Money Market Fund expenses to the extent necessary to achieve an
effective yield for The Money Market Fund that will rank within the top 10% of
yields for all general purpose money market funds in 1996. The Investment
Adviser may change these policies at any time without notice to shareholders.
This would, in some circumstances, have an adverse effect on the net income of
these Funds, and the yields earned by shareholders. For planning purposes,
prospective investors and shareholders should assume that management fees will
not be waived and that expense reimbursements will not be made.
**Distribution Plan Expense: The Trust is party to agreements whereby
consultant companies or individuals (including two Trustees of the Portfolios),
are paid for explaining the Funds, their investment objectives and policies, and
the Trust's retirement plans, to clients. Other distribution plan expense
includes: the expense of printing and mailing prospectuses, periodic reports and
other sales materials to prospective investors; advertising; payment for
marketing programs and the services of public relations consultants; and the
cost of special
5
<PAGE> 9
telephone service to encourage the sale of Trust shares. (See "Distribution
Plans.")
The tables on the preceding page are meant to assist an investor in
understanding the various costs and expenses that an investor in any of the
Funds will bear directly or indirectly. The Trust does not impose a sales
charge, exchange fee or redemption fee with the following exceptions. The
custodian of IRA and 403(b) accounts charges a $5.00 annual maintenance fee and
the transfer agent charges IRA and 403(b) accounts a $7.00 fee if the account is
totally liquidated. For more complete descriptions of the various costs and
expenses of the Trust see "The Trust and Its Management," and "Distribution
Plans."
Principally because there is no duplication of fees or expenses between the
Trust and the Portfolios, the Trustees of the Trust believe that the aggregate
per share expenses of each Fund and corresponding Portfolio will, at a minimum,
be approximately equal to and may be less than the expenses that would be
incurred by the Fund if the Investment Adviser was not waiving fees and if the
Fund continued to retain the services of an investment adviser and to invest
directly in portfolio securities. There can, of course, be no assurance that any
such expense savings will be realized. For additional information concerning
expenses incurred by the Trust and the Portfolios, see "The Trust and Its
Management" herein, and "Investment Adviser and Manager" in the Statement of
Additional Information.
The table and hypothetical example on the preceding page are for
illustrative purposes only. The investment rate of return and expenses should
not be considered as representations of past or future performance, as actual
rates of return and expenses may be more or less than the rate and amounts
shown.
PERFORMANCE INFORMATION--
THE GROWTH FUND, THE MUIRFIELD FUND, THE U.S.
GOVERNMENT BOND FUND AND THE MONEY MARKET FUND
The following is a discussion of performance information relating to The
Growth Fund, The Muirfield Fund, The U.S. Government Bond Fund and The Money
Market Fund. Discussion concerning performance information relating to The Total
Return Utilities Fund is set forth elsewhere in this prospectus. (See
"Performance Information -- The Total Return Utilities Fund".)
From time to time the Trust may publish performance information relative to
these four Funds, and may include such information in advertisements, sales
literature or shareholder reports. It will do so in accordance with methods
which are described in the Statement of Additional Information.
The Money Market Fund will advertise its yield and effective yield. The
simple annualized yield represents the net income for a seven day period,
expressed on an annualized basis. The effective yield will be higher than the
yield because of the compounding effect of the assumed reinvestment of dividends
over a period of one year.
6
<PAGE> 10
The yield quotation for The U.S. Government Bond Fund is based upon a
30-day period ended on a specific date, computed by dividing the Fund's net
investment income per share earned during the period by the Fund's price per
share on the last day of the period. Quotations of yield for The U.S. Government
Bond Fund will be accompanied by total return calculations to the most recent
quarter (see "Total Return" below). "Total return" quotations for The Growth,
Muirfield, Total Return Utilities and U.S. Government Bond Funds will be
expressed in terms of average annual compounded rates of return for the periods
quoted, and will assume that all dividends and distributions were reinvested in
additional shares. When applicable, depending on the Fund, the periods of time
shown will be for a one-year period; a five-year period (or relevant portion
thereof); a ten-year period; and since inception.
Comparative performance information may be used from time to time in
advertising or marketing information relative to these four Funds, including
data from Lipper Analytical Services, Inc., IBC/Donoghue Money Fund Report,
Morningstar Mutual Fund Report, other publications, and various indices or
results of the Consumer Price Index, other mutual funds or investment or
savings vehicles.
Both the yield and the total return figure included in advertisements,
sales literature or shareholder reports will be based on historical performance
and are not intended to indicate future performance.
PERFORMANCE INFORMATION --
THE TOTAL RETURN UTILITIES FUND
The Total Return Utilities Fund's performance may be used from time to time
in advertisements, shareholder reports or other communications to shareholders
or prospective shareholders. Performance information may include the Fund's
investment results and/or comparisons of its investment results to the Standard
& Poor's 500 Composite Stock Price Index, the Standard & Poor's Utility Index,
the Dow Jones Utilities Index or other various unmanaged indices or results of
other mutual funds or investment or savings vehicles. The Fund's investment
results as used in such communications will be calculated on a total rate of
return basis in the manner set forth below. From time to time, Fund rankings may
be quoted from various sources, such as Lipper Analytical Services, Inc. and
Morningstar Mutual Fund Report.
The Fund may provide period and average annualized "total return"
quotations. The Fund's "total return" refers to the change in the value of an
investment in the Fund over a stated period based on any change in net asset
value per share and including the value of any shares purchasable with any
dividends or capital gains distributed during such period. Period total return
may be annualized. Average annual total return smooths out variations in
performance.
An annualized total return is a compounded total return which assumes that
the period total return is generated over a one-year period, and that all
dividends and capital gain distributions are reinvested. An annualized total
return will be slightly higher than a period total return if the period is
shorter than one year, because of the assumed reinvestment.
7
<PAGE> 11
Unlike some bank deposits or other investments which pay a fixed yield for
a stated period of time, the total return of the Fund will vary depending upon
interest rates, the current market value of the securities held by the Utilities
Stock Portfolio and changes in the Fund's expenses. In addition, during certain
periods for which total return quotations may be provided, the Manager may have
voluntarily agreed to waive portions of its fees or reimburse Fund expenses on a
month-to-month basis. Such waivers and reimbursements will have the effect of
increasing the Fund's net income (and therefore its total return) during the
period such waivers and reimbursements are in effect.
Shareholders will receive financial reports semi-annually that include the
Fund's financial statements, including listings of investment securities held by
the Utilities Stock Portfolio at those dates. Annual reports are audited by
independent accountants.
FINANCIAL HIGHLIGHTS
The financial highlights for each of the Trust's current Funds are listed
below. This information has been audited in conjunction with the annual audits
of the financial statements of The Flex-funds and their corresponding Portfolios
by KPMG Peat Marwick LLP, independent certified public accountants, for each of
the periods ended December 31, 1988 through December 31, 1995; and by other
independent certified public accountants for the earlier periods.
<TABLE>
<CAPTION>
THE GROWTH FUND
------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of period $ 13.08 $ 13.45 $ 12.70 $ 12.05 $ 10.21 $ 10.33 $ 9.67 $11.27
INCOME FROM INVESTMENT OPERATIONS
Net Investment income 0.50 0.27 0.09 0.18 0.34 0.57 0.29 0.59
Net Gains or (Losses) on Securities
(both realized and unrealized) 2.68 (0.37) 0.82 0.58 1.84 (0.12) 0.69 (1.22)
- -----------------------------------------------------------------------------------------------------------------------------
Total From Investment Operations 3.18 (0.10) 0.91 0.76 2.18 0.45 0.98 (0.63)
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends (from net investment income) (0.50) (0.27) (0.16) (0.11) (0.34) (0.57) (0.32) (0.78)
Distributions (from capital gains) (0.42) - - - - - - (0.19)
- -----------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.92) (0.27) (0.16) (0.11) (0.34) (0.57) (0.32) (0.97)
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 15.34 $ 13.08 $ 13.45 $ 12.70 $ 12.05 $ 10.21 $ 10.33 $ 9.67
- -----------------------------------------------------------------------------------------------------------------------------
Total Return 24.61% (0.69) 7.21% 6.35% 21.46% 4.31% 10.17% (5.79)%
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period ($000) 24,631 22,176 26,171 25,534 32,654 24,664 29,712 4,478
Ratio of Expenses to Average Net Assets 1.64% 1.63% 1.54% 1.51% 1.42% 1.46% 1.55% 1.50%
Ratio of Net Investment Income to Average
Net Assets 3.38% 1.95% 0.69% 1.31% 2.98% 4.90% 2.63% 2.06%
Portfolio Turnover Rate N/A N/A N/A 39% 265% 436% 50% 313%
<CAPTION>
THE GROWTH FUND
-------------------
1987 1986
---- ----
<S> <C> <C>
Net Asset Value, Beginning of period $ 10.52 $ 10.69
INCOME FROM INVESTMENT OPERATIONS
Net Investment income 0.21 0.20
Net Gains or (Losses) on Securities
(both realized and unrealized) 0.59 1.06
- ------------------------------------------------------------------
Total From Investment Operations 0.80 1.26
- ------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends (from net investment income) (0.05) (0.28)
Distributions (from capital gains) - (1.15)
- ------------------------------------------------------------------
Total Distributions (0.05) (1.43)
- ------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.27 $ 10.52
- ------------------------------------------------------------------
Total Return 7.61% 11.81%
- ------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period ($000) 12,822 10,222
Ratio of Expenses to Average Net Assets 1.48% 1.49%
Ratio of Net Investment Income to Average
Net Assets 1.79% 2.32%
Portfolio Turnover Rate 326% 152%
</TABLE>
Financial Statements and Notes pertaining thereto appear in the Statement of
Additional Information Dated April , 1996.
8
<PAGE> 12
<TABLE>
<CAPTION>
THE MUIRFIELD FUND
---------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988*
---- ---- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of period $ 5.34 $ 5.36 $ 6.25 $ 6.43 $ 5.22 $ 5.84 $ 5.31 $ 5.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) 0.06 0.14 (0.01) 0.06 0.07 0.22 0.10 0.08
Net Gains or (Losses) on Securities
(both realized and unrealized) 1.31 0.00 0.45 0.34 1.41 (0.10) 0.62 0.23
- -----------------------------------------------------------------------------------------------------------------------------
Total From Investment Operations 1.37 0.14 0.44 0.40 1.48 0.12 0.72 0.31
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends (from net investment income) (0.06) (0.14) (0.02) (0.06) (0.27) (0.10) (0.08) -
Distributions (from capital gains) (0.92) (0.02) (1.31) (0.52) - (0.64) (0.11) -
- -----------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.98) (0.16) (1.33) (0.58) (0.27) (0.74) (0.19) -
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 5.73 $ 5.34 $ 5.36 $ 6.25 $ 6.43 $ 5.22 $ 5.84 $ 5.31
- -----------------------------------------------------------------------------------------------------------------------------
Total Return 25.82% 2.70% 8.11% 6.91% 29.83% 2.33% 13.95% 6.20%
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period ($000) 111,751 83,119 73,063 55,280 43,276 29,482 26,031 24,589
Ratio of Expenses to Average Net Assets 1.26% 1.22% 1.26% 1.40% 1.50% 1.52% 1.53% 1.42%+
Ratio of Net Investment Income (Loss)
to Average Net Assets 0.97% 2.55% (0.13)% 1.05% 1.25% 4.46% 1.65% 5.02%+
Portfolio Turnover Rate N/A N/A N/A 324% 107% 649% 202% 63%
</TABLE>
*For the period August 10, 1988 to December 31, 1988
+Annualized
Financial Statements and Notes pertaining thereto appear in the Statement of
Additional Information Dated April , 1996.
9
<PAGE> 13
<TABLE>
<CAPTION>
THE TOTAL RETURN UTILITIES FUND
1995*
-----
<S> <C>
Net Asset Value, Beginning of Period $12.50
INCOME FROM INVESTMENT OPERATIONS
Net Investment income 0.21
Net Gains or Losses on Securities
(both realized and unrealized) 1.64
Total from Investment Operations 1.85
Less Distributions
Dividends (from net investment income) (0.21)
Total Distributions (0.21)
Net Asset Value, End of Period $14.14
Total Return 15.00%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period ($000) 2,881
Ratio of Expenses to Average Net Assets 1.25%+
Ratio of Net Investment Income to Average
Net Assets 3.18%+
Ratio of Expenses to Average Net Assets,
before waiver of fees(1) 4.35%+
Ratio of Net Investment Income to Average
Net Assets, before waiver of fees(1) 0.08%+
Portfolio Turnover Rate N/A
<FN>
*For the period June 21, 1995 to December 31, 1995.
(1) See "Synopsis of Financial Information" for explanation of waiver of
advisory fees.
+ Annualized
Financial Statements and Notes pertaining thereto appear in the Statement of
Additional Information Dated April , 1996.
</TABLE>
10
<PAGE> 14
<TABLE>
<CAPTION>
THE U.S. GOVERNMENT BOND FUND
------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of period $ 19.25 $ 20.18 $ 19.46 $ 19.84 $18.37
INCOME FROM INVESTMENT OPERATIONS
Net Investment income 1.11 0.72 0.86 0.99 1.23
Net Gains or (Losses) on Securities
(both realized and unrealized) 2.33 (0.93) 0.71 (0.38) 1.47
- -----------------------------------------------------------------------------------------------------
Total From Investment Operations 3.44 (0.21) 1.57 0.61 2.70
- -----------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends (from net investment income) (1.11) (0.72) (0.85) (0.99) (1.23)
Distributions (from capital gains) - - - - -
- -----------------------------------------------------------------------------------------------------
Total Distributions (1.11) (0.72) (0.85) (0.99) (1.23)
- -----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 21.58 $ 19.25 $ 20.18 $ 19.46 $19.84
- -----------------------------------------------------------------------------------------------------
Total Return 18.32% (0.99%) 8.21% 3.26% 15.30%
- -----------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period ($000) 16,048 12,983 13,137 11,100 9,316
Ratio of Expenses to Average Net Assets 1.00% 1.00% 0.99% 1.00% 0.94%
Ratio of Net Income to Average Net Assets 5.41% 3.71% 4.25% 5.13% 6.59%
Ratio of Expenses to Average Net Assets,
before waiver of fees(1) 1.14% 1.14% 1.09% 1.21% 1.23%
Ratio of Net Investment Income to Average
Net Assets, before waiver of fees(1) 5.27% 3.57% 4.15% 4.92% 6.30%
Portfolio Turnover Rate N/A N/A N/A 101% 214%
<CAPTION>
THE U.S. GOVERNMENT BOND FUND
----------------------------------------------------
1990 1989 1988 1987 1986
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of period $18.24 $18.25 $19.22 $ 21.31 $ 20.84
INCOME FROM INVESTMENT OPERATIONS
Net Investment income 1.33 1.54 1.49 1.66 1.83
Net Gains or (Losses) on Securities
(both realized and unrealized) 0.13 (0.01) (0.97) (1.78) 0.64
- ---------------------------------------------------------------------------------------------------
Total From Investment Operations 1.46 1.53 0.52 (0.12) 2.47
- ---------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends (from net investment income) (1.33) (1.54) (1.49) (1.66) (1.83)
Distributions (from capital gains) - - - (0.31) (0.17)
- ---------------------------------------------------------------------------------------------------
Total Distributions (1.33) (1.54) (1.49) (1.97) (2.00)
- ---------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $18.37 $18.24 $18.25 $ 19.22 $ 21.31
- ---------------------------------------------------------------------------------------------------
Total Return 8.35% 8.75% 2.74% (0.62%) 12.58%
- ---------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period ($000) 5,493 4,547 6,337 13,424 13,589
Ratio of Expenses to Average Net Assets 0.99% 0.81% 0.83% 0.75% 0.78%
Ratio of Net Income to Average Net Assets 7.33% 8.54% 7.85% 8.31% 8.74%
Ratio of Expenses to Average Net Assets,
before waiver of fees(1) 1.36% 1.15% 0.89% 0.81% 0.83%
Ratio of Net Investment Income to Average
Net Assets, before waiver of fees(1) 6.96% 8.20% 7.79% 8.25% 8.69%
Portfolio Turnover Rate 500% 0.00% 188% 258% 150%
</TABLE>
(1) See "Synopsis of Financial Information" for explanation of adviser's waiver
of fees.
Financial Statements and Notes pertaining thereto appear in the Statement of
Additional Information dated April , 1996.
11
<PAGE> 15
<TABLE>
<CAPTION>
THE MONEY MARKET FUND
------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment income 0.06 0.04 0.03 0.04 0.06
Net Gains or (Losses) on Securities
(both realized and unrealized) - - - - -
- -----------------------------------------------------------------------------------------------------------
Total From Investment Operations 0.06 0.04 0.03 0.04 0.06
- -----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends (from net investment income) (0.06) (0.04) (0.03) (0.04) (0.06)
Distributions (from capital gains) - - - - -
- -----------------------------------------------------------------------------------------------------------
Total Distributions (0.06) (0.04) (0.03) (0.04) (0.06)
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------------------------------------------
Total Return 5.85% 4.10% 2.98% 3.70% 6.12%
- -----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period ($000) 141,087 164,838 200,030 245,259 316,951
Ratio of Expenses to Average Net Assets 0.40% 0.37% 0.37% 0.35% 0.38%
Ratio of Net Investment Income to Average
Net Assets 5.70% 4.02% 2.94% 3.68% 5.96%
Ratio of Expenses to Average Net Assets
before waiver of fees(1) 0.64% 0.57% 0.57% 0.56% 0.56%
Ratio of Net Investment Income to Average
Net Assets, before waiver of fees(1) 5.46% 3.82% 2.74% 3.47% 5.78%
<CAPTION>
THE MONEY MARKET FUND
------------------------------------------------------------
1990 1989 1988 1987 1986
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment income 0.08 0.09 0.07 0.06 0.07
Net Gains or (Losses) on Securities
(both realized and unrealized) - - - - -
- -----------------------------------------------------------------------------------------------------------
Total From Investment Operations 0.08 0.09 0.07 0.06 0.07
- -----------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends (from net investment income) (0.08) (0.09) (0.07) (0.06) (0.07)
Distributions (from capital gains) - - - - -
- -----------------------------------------------------------------------------------------------------------
Total Distributions (0.08) (0.09) (0.07) (0.06) (0.07)
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------------------------------------------
Total Return 8.21% 9.32% 7.59% 6.62% 6.75%
- -----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period ($000) 247,481 264,078 217,183 145,376 170,537
Ratio of Expenses to Average Net Assets 0.38% 0.39% 0.35% 0.41% 0.31%
Ratio of Net Investment Income to Average
Net Assets 7.92% 8.94% 7.50% 6.65% 6.25%
Ratio of Expenses to Average Net Assets
before waiver of fees(1) 0.55% 0.59% 0.60% 0.66% 0.56%
Ratio of Net Investment Income to Average
Net Assets, before waiver of fees(1) 7.75% 8.74% 7.25% 6.40% 6.00%
<FN>
(1) See "Synopsis of Financial Information" for explanation of adviser's waiver
of fees.
Financial Statements and Notes pertaining thereto appear in the Statement of
Additional Information Dated April , 1996.
</TABLE>
12
<PAGE> 16
PERFORMANCE COMPARISONS
<TABLE>
<CAPTION>
THE GROWTH FUND
AVERAGE ANNUAL
TOTAL RETURN
1 YEAR
24.61%
THE GROWTH FUND VS. THE S&P 500 INDEX
The Growth of $10,000 (12/31/85 to 12/31/95) 5 YEARS
11.38%
The Growth Fund The S&P 500 Index* 10 YEARS
$10,000 $10,000 8.36%
<S> <C> <C>
1986 $11,182 $11,850
1987 $12,033 $12,466
1988 $11,336 $14,560
1989 $12,490 $19,147
1990 $13,029 $18,534
1991 $15,825 $24,206
1992 $16,830 $26,069
1993 $18,043 $28,657
1994 $17,918 $29,023
1995 $22,329 $39,912
</TABLE>
1995 IN REVIEW.
The total return of The Growth Fund was 24.61 percent during 1995. This compares
with the return of the average Asset Allocation Fund, as reported by
Morningstar, Inc., of 23.84 percent during 1995. The S&P 500 Index provided a
return of 37.53 percent during 1995. The Growth Fund was fully exposed to the
stock market for much of the year. During that time, the Portfolio of The Growth
Fund was dominated by exposure to large capitalization stocks.
Fully defensive as 1995 began, The Growth Fund was fully exposed to the stock
market in early January. In mid-March the Fund adopted a 50 percent defensive
position. By the first week in June, The Growth Fund was again fully exposed to
the stock market where it remained until the fourth quarter of 1995. By October,
certain fundamental questions about the market's continued advance began to
indicate that the most prudent posture was to again adopt a partially defensive
position. The Growth Fund remained partially defensive until the first week in
December when it returned to a fully invested position.
The graph depicting the growth of $10,000 and the average annual total returns
for The Growth Fund are representative of past performance and are not intended
to indicate future performance.
*The returns of the various indexes are from the beginning or end of the month
nearest the Fund's inception to the end of the calendar year. The index does
not reflect the deduction of expenses associated with a mutual fund, such as
investment management and accounting fees. The Fund's performance reflects
the deduction of fees for these value added services.
13
<PAGE> 17
<TABLE>
<CAPTION>
THE MUIRFIELD FUND
AVERAGE ANNUAL
TOTAL RETURN
1 YEAR
25.82%
THE MUIRFIELD FUND VS. THE S&P 500 INDEX
The Growth of $10,000 (8/10/88 to 12/31/95) 5 YEARS
14.15%
The Muirfield Fund The S&P 500 Index* SINCE INCEPTION (8/10/88)
$10,000 $10,000 12.58%
<S> <C> <C>
1988 $10,620 $10,755
1989 $12,101 $14,143
1990 $12,383 $13,691
1991 $16,077 $17,880
1992 $17,188 $19,257
1993 $18,582 $21,163
1994 $19,084 $21,438
1995 $24,011 $29,481
</TABLE>
1995 IN REVIEW.
The total return of The Muirfield Fund was 25.82 percent during 1995. This
compares with the return of the average Asset Allocation Fund, as reported by
Morningstar, Inc., of 23.84 percent during 1995. The S&P 500 Index provided a
return of 37.53 percent during 1995. The Muirfield Fund was fully exposed to the
stock market for much of the year. The Portfolio of The Muirfield Fund was
invested in mutual funds with large technology holdings for much of that time.
As technology issues cooled during the fourth quarter, The Muirfield Fund
adjusted its Portfolio accordingly, reducing exposure to funds with significant
high-tech exposure and emphasizing exposure to The S&P 500 Index and mutual
funds with exposure to large capitalization stocks.
Fully defensive as 1995 began, The Muirfield Fund was fully exposed to the stock
market in early January. In mid-March, the Fund adopted a 50 percent defensive
position. By the first week in June, The Muirfield Fund was again fully exposed
to the stock market where it remained until the fourth quarter of 1995. By
October, certain fundamental questions about the market's continued advance
began to indicate that the most prudent posture was to again adopt a partially
defensive position. The Muirfield Fund remained partially defensive until the
first week in December when it returned to a fully invested position.
The graph depicting the growth of $10,000 and the average annual total returns
for The Muirfield Fund are representative of past performance and are not
intended to indicate future performance.
*The returns of the various indexes are from the beginning or end of the month
nearest the Fund's inception to the end of the calendar year. The index does
not reflect the deduction of expenses associated with a mutual fund, such as
investment management and accounting fees. The Fund's performance reflects
the deduction of fees for these value added services.
14
<PAGE> 18
<TABLE>
<CAPTION>
THE U.S. GOVERNMENT BOND FUND VS. THE SHEARSON-LEHMAN THE U.S. GOVERNMENT
BROS. INTERMEDIATE GOVERNMENT INDEX AND THE SHEARSON BOND FUND AVERAGE
LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE ANNUAL TOTAL RETURN
BOND INDEX
The Growth of $10,000 (12/31/85 to 12/31/95)
1 YEAR
18.32%
The Shearson The Shearson 5 YEARS
The U.S. Lehman Bros. Lehman Bros. 8.58%
Government Intermediate Intermediate Govt./
Bond Fund Govt. Bond Index* Corp. Bond Index* 10 YEARS
$10,000 $10,000 $10,000 7.26%
<S> <C> <C> <C>
1986 $11,172 $11,307 $11,310
1987 $11,032 $11,715 $11,728
1988 $11,334 $12,465 $12,514
1989 $12,326 $14,046 $14,116
1990 $13,354 $15,387 $15,415
1991 $15,398 $17,555 $17,665
1992 $15,900 $18,770 $18,937
1993 $17,206 $20,327 $20,603
1994 $17,035 $19,972 $20,211
1995 $20,157 $22,854 $23,127
</TABLE>
1995 IN REVIEW.
The U.S Government Bond Fund (formerly, the Bond Fund) provided a total return
of 18.32% during 1995, the largest single-year return in the 10-year history of
the Fund. For the same period, the average General Government Bond Fund, as
reported by Morningstar, Inc., provided a total return of 14.88 percent. The
Shearson Lehman Brothers Intermediate Government Bond Index provided a total
return of 14.43% during 1995. The Shearson Lehman Brothers Intermediate
Government/Corporate Bond Index provided a total return of 15.33% during 1995.
The yield on 10-year U.S. government bonds declined significantly during 1995 --
from 7.88% at the beginning of the year to 5.58% at year's end. This decline in
interest rates pushed bond prices higher and led to the overall strength of the
bond market during 1995. For the fourth quarter and for much of the year, The
U.S. Government Bond Fund remained fully invested in 10-year U.S. Treasuries.
Along with its name change, The U.S. Government Bond Fund changed its investment
objective to invest only in U.S. government securities. See "Investment
Objectives and Policies -- The Bond Portfolio (The U.S. Government Bond Fund)."
As a result of this change in investment objective, The Bond Portfolio may no
longer invest in, among other securities, corporate fixed income securities.
Consequently, the above performance comparison includes a new broad-based index,
The Shearson Lehman Brothers Intermediate Government Bond Index, which does not
include corporate fixed income securities.
The graph depicting the growth of $10,000 and the average annual total returns
for The U.S. Government Bond Fund are representative of past performance and are
not intended to indicate future performance.
*The returns of the various indexes are from the beginning or end of the month
nearest the Fund's inception to the end of the calendar year. The indexes do
not reflect the deduction of expenses associated with a mutual fund, such as
investment management and accounting fees. The Fund's performance reflects
the deduction of fees for these value added services.
15
<PAGE> 19
<TABLE>
<CAPTION>
THE TOTAL RETURN UTILITIES FUND VS. THE DOW THE TOTAL RETURN
JONES UTILITY AVERAGE UTILITIES FUND
The Growth of $10,000 (6/21/95 to 12/31/95) TOTAL RETURN
The Total Return The Dow Jones
Utilities Fund Utility Average* SINCE INCEPTION (6/21/95)
$10,000 $10,000 15.00%
<S> <C> <C>
1995 $11,500 $11,483
</TABLE>
1995 IN REVIEW.
From June 21, 1995 to December 31, 1995, The Total Return Utilities Fund
provided a total return of 15.00%. The average Specialty-Utilities Fund, as
reported by Morningstar, Inc., provided a total return of 14.34 percent during
the last six months of 1995. For that same period, the Dow Jones Utility Average
provided a total return of 14.83%.
The entire utilities market was strong during the fourth quarter for many
reasons. First, interest rates not only remained low but also declined
substantially, particularly at the long end of the bond market. There was little
show of strength in the economy -- a circumstance which is typically met with
rate declines. Second, though the telecommunications legislation we thought
would pass in the fourth quarter was caught in the budget bottleneck, investors
continued to focus on the benefits for the Regional Bell stocks, and these
performed extremely well. Third, the spread between utility yields and bond
yields, which had become inverted, made progress back to normalcy -- thus
permitting utilities to overcome even a strong bond market in terms of
performance. Fourth, both demand and pricing for natural gas boomed as "normal"
winter returned to the land, helping our substantial gas industry position to
recover.
The graph depicting the growth of $10,000 and the total return for The Total
Return Utilities Fund are representative of past performance and are not
intended to indicate future performance.
*The returns of the various indexes are from the beginning or end of the month
nearest the Fund's inception to the end of the calendar year. The index does
not reflect the deduction of expenses associated with a mutual fund, such as
investment management and accounting fees. The Fund's performance reflects the
deduction of fees for these value added services.
16
<PAGE> 20
INVESTMENT OBJECTIVES AND POLICIES
The Trust offers five separate Funds. Each Fund and each Portfolio has its
own separate investment objectives and policies, as set forth below. These
investment objectives and policies, which are identical for a Fund and its
corresponding Portfolio, are not fundamental and may be changed by their
respective Trustees without approval of a Fund's shareholders, or approval of a
Portfolio's investors. No such change would be made in a Fund, or Portfolio,
without 30 days written notice to shareholders.
The Trust seeks to achieve each Fund's investment objective by investing
all of its investable assets in a corresponding Portfolio. As a result, The
Growth Fund invests in the Growth Stock Portfolio, The Muirfield Fund invests in
the Mutual Fund Portfolio, The Total Return Utilities Fund invests in the
Utilities Stock Portfolio, The U.S. Government Bond Fund invests in the Bond
Portfolio and The Money Market Fund invests in the Money Market Portfolio. For
more information concerning the investment structure of each Fund investing its
assets in a corresponding Portfolio, see "Other Information--Investment
Structure."
Since the investment characteristics of each Fund will correspond directly
to those of the corresponding Portfolio, the following is a discussion of the
various investments of and techniques employed by each Portfolio. Additional
information about the investment policies of each Portfolio appears in the
Statement of Additional Information. There can be no assurance that the
investment objectives of any Portfolio will be achieved.
Each Portfolio, except the Money Market Portfolio, may invest in
financial futures contracts or related options as a hedge against changes,
resulting from market conditions, in the values of securities held or which
these Portfolios intend to purchase. These financial futures contracts or
related options are considered derivatives. The value of derivatives can be
affected significantly by even small market movements, sometimes in
unpredictable ways. See "Additional Investment Policies - Hedging Strategies."
THE GROWTH STOCK PORTFOLIO
(THE GROWTH FUND)
The investment objective of the Growth Stock Portfolio is long-term growth
of capital through investment in common stocks. The Portfolio will invest in two
representative groups of common stocks; one comprised of large capitalization
stocks, the other of small capitalization stocks. At times, the Portfolio may
invest more heavily in one group than in the other. For the purposes of this
policy, "large capitalization" stocks are defined as stocks of companies that
rank in the top one-third of the common stocks listed on the New York Stock
Exchange ("N.Y.S.E."), based upon their equity capitalization. The "small
capitalization" group are defined as stocks of companies that rank in the middle
one-third of the common stocks listed on the N.Y.S.E., based upon their equity
capitalization. This group of stocks would generally rank near or slightly below
the average capitalization of all common stocks listed on the N.Y.S.E.
Stocks in the two groups will correspond to the stocks contained in one or
more standard securities indexes, or segments of such indexes, because such
indexes are representative of a broad range of economic sectors or industries.
Indexes would include but not be limited to the widely reported indexes
maintained or published by Dow Jones and Standard & Poor's. Stocks in the large
capitalization group may be included on an equal-weighted,
capitalization-weighted or price-weighted basis. Stocks in the small
capitalization group will generally be included on an equally-weighted basis.
Stocks may be deleted from either group in order to meet diversification
requirements or due to mergers, takeovers, or bankruptcy.
17
<PAGE> 21
THE MUTUAL FUND PORTFOLIO
(THE MUIRFIELD FUND)
The investment objective of the Mutual Fund Portfolio is growth of capital.
The Portfolio will seek to attain its investment objective through investment in
the shares of open-end investment companies--commonly called mutual funds. The
underlying mutual funds will consist of diversified mutual funds which invest
primarily in common stock or securities convertible into or exchangeable for
common stock (such as convertible preferred stock, convertible debentures or
warrants) and which seek long-term growth or appreciation, with current income
typically of secondary importance.
Underlying funds may include funds which concentrate investments in a
particular industry sector, or which leverage their investments. The Portfolio
will not invest in other Funds of the Flex-funds family of Funds.
The Portfolio will generally purchase "no-load" mutual funds, which are sold and
purchased without a sales charge. However, the Portfolio may purchase "load"
mutual funds only if the load, or sales commission, is by previous agreement
waived for purchases or sales made by the Portfolio.
The Portfolio may at times desire to gain exposure to the stock market
through the purchase of "Index" funds (funds which purchase stocks represented
in popular stock market averages) with a portion of its assets. "Index" funds
may be purchased with a portion of the Portfolio's assets at times when the
Investment Adviser's selection process identifies the characteristics of a
particular index to be more favorable than those of other mutual funds available
for purchase. If, in the Investment Adviser's opinion, the Portfolio should have
exposure to certain stock indices and the Portfolio can efficiently and
effectively implement such a strategy by directly purchasing the common stocks
of a desired index for the Portfolio itself, it may do so.
An investor in the Portfolio should recognize that he may invest directly
in mutual funds and that by investing in mutual funds indirectly through the
Portfolio, he will bear not only his proportionate share of the expenses of the
Portfolio (including operating costs and investment advisory and administrative
fees) but also indirectly similar expenses of the underlying mutual funds.
See the Trust's Statement of Additional Information for other details.
THE UTILITIES STOCK PORTFOLIO
(THE TOTAL RETURN UTILITIES FUND)
The investment objective of the Utilities Stock Portfolio is to seek a high
level of current income and growth of income by investing primarily in equity
securities of domestic and foreign public utility companies; however, the
Portfolio will not invest in electric utilities
18
<PAGE> 22
whose generation of power is derived from nuclear reactors. The Portfolio also
seeks capital appreciation, but only when consistent with its primary investment
objective. There can be no assurance that such objective will be achieved.
The Portfolio seeks to achieve its objective by investing, under normal
conditions, at least 65% of its total assets in a diversified portfolio of
common stocks, preferred stocks, warrants and rights, and securities convertible
into common or preferred stock of public utility companies. Public utility
companies include domestic or foreign companies that provide electricity,
natural gas, water, telecommunications or sanitary services to the public. The
Portfolio will not invest more than 5% of its assets in equity securities of
issuers whose debt securities are rated below investment grade, that is, rated
below one of the four highest rating categories by Standard & Poor's Corporation
("S&P") or Moody's Investors Service, Inc. ("Moody's") or deemed to be of
equivalent quality in the judgment of the Subadviser. Debt securities rated
below investment grade are rated below Baa or BBB.
The remaining 35% of the Portfolio's assets may be invested in debt
securities issued by public utility companies, and/or equity and debt securities
of issuers outside of the public utility industry which in the opinion of the
Subadviser stand to benefit from developments in the public utilities industry.
The Portfolio will not invest more than 40% of its assets in the telephone
industry. The Portfolio may invest up to 25% of its assets in securities of
foreign issuers. The Portfolio will not invest more than 10% of its assets in
securities that are deemed to be illiquid. See "Investment Policies and
Limitations" in the Statement of Additional Information.
Investments are selected on the basis of fundamental analysis to identify
those securities that, in the judgment of the Subadviser, provide a high level
of current income and growth of income, and secondarily, capital appreciation,
but only when consistent with its primary investment objective.
Fundamental analysis involves assessing a company and its business
environment, management, balance sheet, income statement, anticipated earnings
and dividends and other related measures of value. The Subadviser monitors and
evaluates the economic and political climate of the area in which each company
is located. The relative weightings among common stocks, debt securities and
preferred stocks will vary from time to time based upon the Subadviser's
judgment of the extent to which investments in each category will contribute to
meeting the Portfolio's investment objective.
The Subadviser emphasizes quality in selecting investments for the
Portfolio, and in addition to looking for high credit ratings, the Subadviser
ordinarily looks for several of the following characteristics: above average
earnings growth; above average growth of book value; an above average balance
sheet; high earnings to debt service coverage; low ratio of dividends to
earnings; high return on equity; low debt to equity ratio; an above average
rating with respect to government regulation; growing rate base; lack of major
construction programs and strong management.
19
<PAGE> 23
The Portfolio may invest up to 35% of its total assets in debt securities
of issuers in the public utility industries. Debt securities in which the
Portfolio invests generally are limited to those rated A or better by S&P or
Moody's or deemed to be of equivalent quality in the judgment of the Subadviser.
A change in prevailing interest rates is likely to affect the Portfolio's
net asset value because prices of debt securities and equity securities of
utility companies tend to increase when interest rates decline and decrease when
interest rates rise.
During periods when the Subadviser deems it necessary for temporary
defensive purposes, the Portfolio may invest without limit in high quality money
market instruments. These instruments consist of commercial paper, certificates
of deposit, banker's acceptances and other bank obligations, obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities, high
grade corporate obligations and repurchase agreements.
Except as otherwise expressly provided herein, all investment objectives
and policies stated throughout this prospectus are not fundamental and may be
changed without approval of the Fund's shareholders. No such change would be
made in the Fund without 30 days prior written notice to shareholders. The
Portfolio may not purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. government or any of its agencies or
instrumentalities) if, as a result, more than 25% of the Portfolio's total
assets would be invested in the securities of companies whose principal business
activities are in the same industry, except that the Portfolio may invest more
than 25% of its total assets in securities of public utility companies. The
Portfolio may not, with respect to 75% of its total assets, purchase the
securities of any issuer (other than obligations issued or guaranteed by the
government of the United States, or any of its agencies or instrumentalities)
if, as a result thereof, (a) more than 5% of the Portfolio's total assets would
be invested in the securities of such issuer, or (b) the Fund would hold more
than 10% of the voting securities of such issuer. The foregoing investment
policies regarding concentration and diversification are fundamental and may not
be changed without shareholder approval. See "Investment Policies and
Limitations" in the Statement of Additional Information of The Total Return
Utilities Fund.
THE BOND PORTFOLIO (THE U.S. GOVERNMENT BOND FUND)
The investment objective of the Bond Portfolio is to maximize, consistent
with its permitted universe of investments, current income through investment
only in securities which are issued, or guaranteed as to payment of principal
and interest, by the U.S. government or any of its agencies or
instrumentalities.
The U.S. government securities in which the Bond Portfolio invests are
either issued or guaranteed by the U.S. government, its agencies, or
instrumentalities. These securities are limited to: (1) direct obligations of
the U.S. Treasury, such as U.S. Treasury bills, notes, and bonds; (2) notes,
bonds, and discount notes of U.S. government agencies or instrumentalities, such
as the: Farm Credit System, including the National Bank for Cooperatives, Farm
Credit Banks, and Banks for Cooperatives; Farmers Home Administration; Federal
Home Loan Banks; Federal Home Loan Mortgage Corporation; Federal National
Mortgage Association; Government National Mortgage Association; and Student Loan
Marketing Association; and (3)
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repurchase agreements relating to any of the foregoing U.S. government
securities.
Some obligations issued or guaranteed by agencies or instrumentalities of
the U.S. government, such as Government National Mortgage Association
participation certificates, are backed by the full faith and credit of the U.S.
Treasury. No assurance can be given that the U.S. government will provide
financial support to other agencies or instrumentalities, since it is not
obligated to do so. These agencies and instrumentalities are supported by: (1)
the issuer's right to borrow an amount limited to a specific line of credit from
the U.S. Treasury; (2) discretionary authority of the U.S. government to
purchase certain obligations of an agency or instrumentality; or (3) the credit
of the agency or instrumentality.
The prices of U.S. government securities fluctuate inversely to the
direction of interest rates.
Repurchase agreements are arrangements in which banks, broker/dealers, and
other recognized financial institutions sell U.S. government securities to the
Bond Portfolio and agree at the time of sale to repurchase them at a mutually
agreed upon time and price. To the extent that the original seller does not
repurchase the securities from the Bond Portfolio, it could receive less than
the repurchase price on any sale of such securities.
The Bond Portfolio will invest in U.S. government securities of varying
maturities. Normally the average portfolio maturity will be approximately ten
years as long as the Investment Adviser believes interest rates are stable or
declining. The Bond Portfolio's assets will be invested in money market
instruments when the Investment Adviser believes an unstable or rising interest
rate trend is occurring. If the Investment Adviser believes that long-term
interest rates offer an abnormally high current return versus inflation, the
Bond Portfolio may be invested in U.S. government securities with maturities as
long as 30 years.
Information concerning the selection of money market instruments is set
forth in the Trust's Statement of Additional Information.
THE MONEY MARKET PORTFOLIO
(THE MONEY MARKET FUND)
The investment objective of the Money Market Portfolio is current income
and stable asset values through investment in money market instruments. The
Portfolio will seek to maintain a constant net asset value of $1 per share,
although there is no assurance it will be able to do so. The Portfolio will seek
to achieve its objective by investing in a portfolio of high-quality money
market instruments which mature in 397 days or less. Further, the Portfolio will
seek to minimize changes in the value of its assets due to market factors by
maintaining a dollar-weighted average portfolio maturity of 90 days or less.
The Portfolio will value its securities by the amortized cost method, and
will normally include any accrued discount or premium in its daily dividend and
thereby keep constant the value of its assets and its net asset value per share.
This method does not take into account unrealized capital gains or losses.
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<PAGE> 25
Further, the Portfolio may change its average portfolio maturity or level
of quality to protect its and the Fund's net asset value when it is perceived
that changes in the liquidity of major financial institutions may adversely
affect the money markets. Consequently, for temporary defensive purposes the
Portfolio may shorten the average maturity of its investments and/or invest only
in the highest quality debt instruments, including, for example, U.S. Government
or Agency obligations.
The Portfolio will invest exclusively in money market instruments which are
deemed eligible securities pursuant to rules under the Investment Company Act
applying to money market funds. At least 95% of the Portfolio's assets will be
invested in securities defined by the rules as "first-tier" securities.
First-tier securities must have two quality ratings which are in the highest
rating category, or one if rated by only one organization.
Second-tier securities must have ratings in the highest two rating
categories and will be limited to a maximum of five percent of assets with each
position limited to $1,000,000 or 1% of assets. The Portfolio also intends to
comply with all other quality and credit quality monitoring criteria applying to
money market funds. Information concerning specific quality criteria is set
forth in the Trust's Statement of Additional Information.
ADDITIONAL INVESTMENT POLICIES OF THE GROWTH STOCK,
MUTUAL FUND, BOND AND MONEY MARKET PORTFOLIOS
The following is a discussion of the additional investment policies of the
Growth Stock, Mutual Fund, Bond and Money Market Portfolios. Discussion
concerning these additional investment policies of the Utilities Stock Portfolio
are set forth elsewhere in this prospectus. (See "Additional Investment Policies
of The Utilities Stock Portfolio".)
MONEY MARKET INSTRUMENTS AND BONDS -- THE GROWTH STOCK, MUTUAL FUND AND MONEY
MARKET PORTFOLIOS
When investing in money market instruments or bonds, the Growth Stock,
Mutual Fund and Money Market Portfolios will limit their purchases, denominated
in U.S. dollars, to the following securities:
- U.S. Government Securities and Securities of its Agencies and
Instrumentalities.
- Bank Obligations and Instruments Secured Thereby.
- High Quality Commercial Paper--The Growth Fund and Mutual Fund
Portfolios may invest in commercial paper rated no lower than "A-2" by
Standard & Poor's Corporation or "Prime-2" by Moody's Investors
Services, inc., or, if not rated, issued by a company having an
outstanding debt issue rated at least A by Standard & Poor's or
Moody's. The Money market Portfolio is subject to specific and more
stringent quality criteria and diversification requirements. (See The
Money Market Portfolio above.)
- Private Placement Commercial Paper--unregistered securities which are
traded in public markets to qualified institutional investors, such as
these three Portfolios. The Trustees have determined that each of these
three Portfolios may invest up to 35% of
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its assets, at cost on the date of purchase, in private placement
commercial paper.
- High Grade Corporate Obligations--obligations rated at least A by
Standard & Poor's or Moody's.
- Repurchase Agreements Pertaining to the Above--A Portfolio may invest
without limit in any of the above securities subject to repurchase
agreements with any Federal Reserve reporting dealer or member bank of
the Federal Reserve System. Repurchasing agreements usually are for
short periods, such as one week or less, but could be longer. No
portfolio will invest more than 10% of its assets, at time of purchase,
in repurchase agreements which mature in excess of seven days or in
other illiquid or not readily marketable securities.
MONEY MARKET INSTRUMENTS - THE BOND PORTFOLIO
When investing in money market instruments, The Bond Portfolio will limit
its purchases, denominated in U.S. dollars, to securities which are issued, or
guaranteed as to payment of principal and interest, by the U.S. government or
any of its agencies or instrumentalities. Unlike the other Portfolios, the Bond
Portfolio (whether invested defensively or otherwise) may not invest in bank
obligations and instruments secured thereby, high quality commercial paper,
private placement commercial paper or corporate obligations.
HEDGING STRATEGIES
Each Portfolio except the Money Market Portfolio may engage in hedging
transactions in carrying out their investment policies. A hedging program may be
implemented for the following reasons: (1) To protect the value of specific
securities owned or intended to be purchased while the Investment Adviser is
implementing a change in a specific Portfolio's investment position; (2) To
protect portfolio values during periods of extraordinary risk without incurring
transaction costs associated with buying or selling actual securities; and (3)
To utilize the "designated hedge" provisions of Sub-Chapter M of the Internal
Revenue Code as a permitted means of avoiding taxes that would otherwise have to
be paid on gains from the sale of portfolio securities.
A hedging program involves entering into an "option" or "futures"
transaction in lieu of the actual purchase or sale of securities. At present,
many groups of common stocks (stock market indices) may be made the subject of
futures contracts, while government securities such as Treasury Bonds and Notes
are among debt securities currently covered by futures contracts.
Derivatives are financial instruments whose performance is derived, at
least in part, from the performance of an underlying asset, security or index.
Accordingly, these financial futures contracts or related options used by a
Portfolio to implement its hedging strategies are considered derivatives. The
value of derivatives can be affected significantly by even small market
movements, sometimes in unpredictable ways. They do not necessarily increase
risk, and may in fact reduce risk.
Portfolios will not engage in transactions in financial futures contracts
or related options for speculation but only as a hedge against changes in the
market value of securities held in their portfolios, or which they intend to
purchase, and where the transactions are economically
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<PAGE> 27
appropriate to the reduction of risks inherent in the ongoing management of a
Portfolio. For certain regulatory purposes, the Commodity Futures Trading
Commission ("CFTC") limits the types of futures positions that can be taken in
conjunction with the management of a securities portfolio for mutual funds, such
as The Flex-funds. All futures transactions for the Portfolio will consequently
be subject to the restrictions on the use of futures contracts established in
CFTC rules, such as observation of the CFTC's definition of "hedging." In
addition, whenever the Portfolio establishes a long futures position, it will
set aside cash or cash equivalents equal to the underlying commodity value of
the long futures contracts held by the Portfolio. Although all futures contracts
involve leverage by virtue of the margin system applicable to trading on futures
exchanges, the Portfolio will not, on a net basis, have leverage exposure on any
long futures contracts that it establishes because of the cash set aside
requirement. All futures transactions can produce a gain or a loss when they are
closed, regardless of the purpose for which they have been established. Unlike
short futures contracts positions established to protect against the risk of a
decline in value of existing securities holdings, the long futures positions
established by the Portfolio to protect against reinvestment risk are intended
to protect the Portfolio against the risks of reinvesting portfolio assets that
arise during periods when the assets are not fully invested in securities.
A Portfolio may not purchase or sell financial futures or purchase related
options if immediately thereafter the sum of the amount of margin deposits on
the Portfolio's existing futures positions and premiums paid for related options
would exceed 5% of the market value of the Portfolio's total assets.
The Portfolios expect that any gain or loss on hedging transactions will be
substantially offset by any gain or loss on the securities underlying the
contracts or being considered for purchase. There can be no guaranty that a
Portfolio will be able to realize this objective and, as noted below under "Risk
Factors," there are some risks in utilizing a hedging strategy.
RISK FACTORS
The Growth Stock, Mutual Fund and Bond Portfolios will be invested in
securities which fluctuate in market value, so net asset value per share will
fluctuate as well. When the Growth Stock Portfolio is invested in smaller
capitalization issues, it could be subject to wider price fluctuations than the
stock market as measured by popular market indices. The value of the Bond
Portfolio could fluctuate as interest rate levels change, i.e. it can go down if
interest rates increase and conversely its value can increase if interest rates
decline. The Mutual Fund Portfolio is by definition a non-diversified fund. It
may have more than five percent of its assets invested in one fund. If the
underlying fund performs poorly, this could negatively impact the value of the
Mutual Fund Portfolio. Thus, there is no guarantee that a shareholder will
receive the full amount of his investment upon the redemption of shares. The
Portfolios do, however, seek to minimize the risk of loss through
diversification and, at times, the use of hedging techniques and defensive
investment strategies. Hedging involves risks which are not present in some
other mutual funds with similar objectives (See "Hedging Strategies.")
Put and call option contracts involve some risk. For example, the total
premium paid for an option contract could be lost if the Portfolio does not sell
the contract or exercise the
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contract prior to its expiration date.
Futures contracts likewise involve some risk. It is possible that the
contract(s) selected by the Investment Adviser will not follow exactly the price
movement of the securities covered by the contract. If this occurs, the
objective of the hedging strategy may not be successful.
Although the Mutual Fund Portfolio will invest in a number of underlying
mutual funds, this practice will not eliminate investment risk. To the extent
that the Mutual Fund Portfolio invests in underlying funds which leverage
investments or concentrate investments in one industry, an investment in the
Mutual Fund Portfolio will indirectly entail the additional risks associated
with these practices. Leveraged mutual funds may have higher volatility than the
over-all market or other mutual funds. This may result in greater gains or
losses than the over-all market or other non-leveraged mutual funds. Mutual
funds which concentrate investments in a single industry lack normal
diversification and are exposed to losses stemming from negative industry-wide
developments.
Any of the Portfolios may invest in repurchase agreements with banks and
securities brokers and, except for The Bond Portfolio, in private placement
commercial paper.
All repurchase agreements entered into by a Portfolio will be fully
collateralized. The Portfolio's risk is that the seller may fail to repurchase
the security on the delivery date. If the seller defaults, the underlying
security constitutes collateral for the seller's obligation to pay. It is a
policy of the Portfolio to make settlement on repurchase agreements only upon
proper delivery of the underlying collateral. In the event of a bankruptcy or
other default of a seller of a repurchase agreement to the Portfolio, the
Portfolio could encounter delays and expenses in enforcing its rights and could
experience losses, including a decline in the value of the underlying securities
and loss of income.
Private placement commercial paper ("Rule 144A securities") consists of
unregistered securities which are traded in public markets to qualified
institutional investors, such as The Growth Stock, Mutual Fund and Money Market
Portfolios. A Portfolio's risk is that the universe of potential buyers for the
securities, should the Portfolio desire to liquidate a position, is limited to
qualified dealers and institutions, and therefore such securities could have the
effect of being illiquid.
PORTFOLIO TURNOVER
Because the Manager intends to employ flexible defensive investment
strategies when market trends are not considered favorable, the Manager may
occasionally change the entire portfolio in any, or several, of the Portfolios.
High transaction costs could result when compared with other funds. Trading may
also result in realization of net short-term capital gains upon which
shareholders may be taxed at ordinary tax rates when distributed from a Fund.
This defensive investment strategy can produce high portfolio turnover
ratios when calculated in accordance with SEC rules. However, viewed in terms of
"round trips," The Growth Stock Portfolio and Mutual Fund Portfolio completed
one and one-half "round trips"
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in the stock market during the year, whereas The Bond Portfolio completed two
"round trips" in the bond market.
Management is presently unable to predict the portfolio turnover rate for
the current year in any of the Portfolios, as any major change in investment
posture to a defensive position, or vice versa, will result in a portfolio
turnover of 100% or more. It is conceivable that the turnover rate for one or
more of the Portfolios will exceed 300% in the current year.
All Portfolios intend to comply with the short-term trading restrictions of
Subchapter M of the Internal Revenue Code of 1986, as amended, although these
restrictions could inhibit a rapid change in a Portfolio's investments. All
Portfolios will strive for a positive investment return each calendar year.
ADDITIONAL INVESTMENT POLICIES OF THE UTILITIES STOCK
PORTFOLIO
MONEY MARKET INSTRUMENTS.
When investing in money market instruments, the Portfolio will limit its
purchases, denominated in U.S. dollars, to the following securities:
- U.S. Government Securities and Securities of its Agencies and
Instrumentalities.
- Bank Obligations and Instruments Secured Thereby.
- High Quality Commercial Paper--The Portfolio may invest in commercial
paper rated no lower than "A-2" by Standard & Poor's Corporation or
"Prime-2" by Moody's Investors Services, Inc., or, if not rated, issued
by a company having an outstanding debt issue rated at least A by
Standard & Poor's or Moody's.
- Private Placement Commercial Paper--unregistered securities which are
traded in public markets to qualified institutional investors, such as
the Portfolio.
- High Grade Corporate Obligations--obligations rated at least A by
Standard & Poor's or Moody's.
- Repurchase Agreements--see "Repurchase Agreements" below.
At the discretion of the Subadviser, the Portfolio may employ the following
strategies in pursing its investment objective.
HEDGING STRATEGIES
Currency, Options and Futures Transactions. The Portfolio may use forward
currency contracts, futures contracts, options on securities or options on
futures contracts to implement strategies to attempt to hedge its portfolio,
i.e., reduce the overall level of investment risk
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<PAGE> 30
normally associated with the Portfolio. There can be no assurance that such
efforts will succeed. These techniques are described below and are further
detailed in the Statement of Additional Information.
To attempt to hedge against adverse movements in exchange rates between
currencies, the Portfolio may enter into forward currency contracts for the
purchase or sale of a specified currency at a specified future date. Such
contracts may involve the purchase or sale of a foreign currency against the
U.S. dollar, or may involve two foreign currencies. The Portfolio may enter into
forward currency contracts either with respect to specific transactions or with
respect to the Portfolio's positions. For example, when the Portfolio
anticipates making a purchase or sale of a security, the Portfolio may enter
into a forward currency contract in order to set the rate at which a currency
exchange transaction related to the purchase or sale will be made. Further, when
the Subadviser believes that a particular currency may decline compared to the
U.S. dollar or another currency, the Portfolio may enter into a forward contract
to sell the currency the Subadviser expects to decline in an amount
approximating the value of some or all of the Portfolio's securities denominated
in a foreign currency. The Portfolio also may write covered call options and
purchase put and call options on currencies to hedge against movements in
exchange rates.
In addition, the Portfolio may write covered call options and purchase put
and call options on equity and debt securities to hedge against the risk of
fluctuations in the prices of securities held by the Portfolio or which the
Subadviser intends to include in the Portfolio. The Portfolio also may write
covered call options and buy put and call options on stock indexes. Such stock
index options serve to hedge against overall fluctuations in the securities
markets generally or in the utilities market sector specifically, rather than
anticipated increases or decreases in the value of a particular security.
Further, the Portfolio may sell stock index futures contracts and may
purchase put options or write covered call options on such futures contracts to
protect against a general stock market decline or a decline in the utilities
market sector that could adversely affect the Portfolio. The Portfolio also may
buy stock index futures contracts and purchase call options on such contracts to
hedge against a general stock market or market sector advance and thereby
attempt to lessen the cost of future securities acquisitions. The Portfolio may
use interest rate futures contracts and options thereon to hedge the debt
portion of the Portfolio against changes in the general level of interest rates.
The Portfolio may write only "covered" call options. An option written on a
security or currency is "covered" when, so long as the Portfolio is obligated
under the option, it owns the underlying security or currency. The Portfolio
will "cover" stock index options and options on futures contracts it writes by
maintaining in a segregated account either marketable securities, which in the
Subadviser's judgment correlate to the underlying index or futures contract or
an amount of cash, U.S. government securities or other liquid, high grade debt
securities equal in value to the amount the Portfolio would be required to pay
were the option exercised.
Although the Portfolio might not employ any of the foregoing strategies,
its use of forward currency contracts, options and futures would involve certain
investment risks and transaction
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<PAGE> 31
costs to which it might not otherwise be subject. These risks include:
dependence on the Subadviser's ability to predict movements in the prices of
individual securities, fluctuations in the general securities markets or in the
utilities market sector and movements in interest rates and currency markets;
imperfect correlation between movements in the price of currency, options,
futures contracts or options thereon and movements in the price of the currency
or security hedged or used for cover; the fact that skills and techniques needed
to trade options, futures contracts and options thereon or to use forward
currency contracts are different from those needed to select the securities in
which the Portfolio invests; lack of assurance that a liquid secondary market
will exist for any particular option, futures contract or option thereon at any
particular time; and the possible need to defer closing out of certain options,
futures contracts and options thereon in order to continue to qualify for the
beneficial tax treatment afforded regulated investment companies under the
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"). See
"Distributions and Taxes" in the Statement of Additional Information.
Derivatives are financial instruments whose performance is derived, at
least in part, from the performance of an underlying asset, security or index.
Accordingly, these financial futures contracts, related options and forward
currency contracts used by the Portfolio to implement its hedging strategies are
considered derivatives. The value of derivatives can be affected significantly
by even small market movements, sometimes in unpredictable ways. They do not
necessarily increase risk, and may in fact reduce risk.
SECURITIES LENDING
The Portfolio may lend its portfolio securities to brokers or dealers,
banks or other recognized institutional borrowers of securities, provided that
the borrower at all times maintains cash or equivalent collateral or secures a
letter of credit in favor of the Portfolio in an amount equal to at least 100%
of the market value of the securities loaned. During the time portfolio
securities are on loan, the borrower will pay the Portfolio an amount equivalent
to any dividend or interest paid on such securities and earn additional income,
or the Portfolio may receive an agreed-upon amount of interest income from the
borrower. In accordance with applicable regulatory requirements, the Portfolio
may lend up to 30% of the value of its total assets. The risks in lending
portfolio securities, as well as with other extensions of secured credit,
consist of possible delay in receiving additional collateral or in recovery of
the securities or possible loss of rights in the collateral should the borrower
fail financially.
REPURCHASE AGREEMENTS
The Portfolio may enter into repurchase agreements whereby the seller of a
security agrees to repurchase that security from the Portfolio at a mutually
agreed-upon time and price. The repurchase date is usually within a day or two
of the original purchase, although it may not be for a number of months. The
resale price is in excess of the purchase price, reflecting an agreed-upon rate
of return effective for the period of time the Portfolio's money is invested in
the security. The Portfolio's repurchase agreements will at all times be fully
collateralized in an amount at least equal to the purchase price, including
accrued interest earned on the underlying securities. The instruments held as
collateral are valued daily, and as the value of instruments declines, the
Portfolio will require additional collateral. If the seller defaults or
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<PAGE> 32
becomes insolvent and the value of the collateral securing the repurchase
agreement declines, the Portfolio may incur a loss.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
The Portfolio may purchase or sell securities on a when-issued or delayed
delivery basis. When-issued or delayed delivery transactions arise when
securities are purchased or sold by the Portfolio with payment and delivery
taking place as much as a month or more in the future in order to secure what is
considered to be an advantageous price and yield to the Portfolio at the time of
entering into the transaction. The Portfolio's Custodian will maintain, in a
segregated account of the Portfolio, cash, U.S. Government securities or other
liquid high-grade debt obligations having a value equal to or greater than the
Portfolio's purchase commitments; the Custodian will likewise segregate
securities sold on a delayed delivery basis. The securities so purchased are
subject to market fluctuation and no interest accrues to the purchaser during
the period between purchase and settlement. At the time of delivery of the
securities the value may be more or less than the purchase price and an increase
in the percentage of the Portfolio's assets committed to the purchase of
securities on a when-issued or delayed delivery basis may increase the
volatility of the Portfolio's net asset value.
BORROWING
The Portfolio may borrow an amount up to 33-1/3% of the value of its total
assets (calculated when the loan is made) from banks for temporary or emergency
purposes. The Portfolio may pledge up to 33-1/3% of its assets to secure such
borrowings. The Portfolio may borrow from banks or from other funds or
portfolios advised by the Manager, or through reverse repurchase agreements.
However, the Portfolio will not purchase portfolio securities if borrowings
exceed 5% of the Portfolio's total assets.
If the Portfolio borrows money, the Fund's share price may be subject to
greater fluctuation until the borrowing is paid off.
RISK FACTORS
By itself, the Portfolio does not constitute a balanced investment plan;
the Portfolio seeks a high level of current income and growth of income with
capital appreciation as a secondary objective. The Portfolio invests primarily
in common stock, preferred stock and securities convertible into common or
preferred stock. Changes in interest rates may also affect the value of the
Portfolio's investments, and rising interest rates can be expected to reduce the
Portfolio's net asset value. The Fund's share price and total return fluctuate
and your investment may be worth more or less than your original cost when you
redeem your shares.
Because the Portfolio concentrates its investments in public utility
companies, its performance will depend in large part on conditions in the public
utility industries. Utility stocks have traditionally been popular among more
conservative stock market investors because they have generally paid above
average dividends. However, utility stocks can still be affected by the risks of
the stock market, as well as factors specific to public utility companies.
Governmental regulation of public utility companies can limit their ability to
expand their
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<PAGE> 33
business or to pass cost increases on to customers. Companies providing power or
energy-related services may also be affected by fuel shortages or cost
increases, environmental protection or energy conservation regulations, as well
as fluctuating demand for their services. Some public utility companies are
facing increased competition, which may reduce their profits. All of these
factors are subject to rapid change, which may affect utility companies
independently from the stock market as a whole.
In seeking its investment objectives, the Portfolio may invest in
securities of foreign issuers. Foreign securities may involve a higher degree of
risk and may be less liquid or more volatile than domestic investments. Foreign
securities usually are denominated in foreign currencies, which means their
value will be affected by changes in the strength of foreign currencies
relative to the U.S. dollar as well as the other factors that affect security
prices. Foreign companies may not be subject to accounting standards or
governmental supervision comparable to U.S. companies, and there often is less
publicly available information about their operations. Generally, there is less
governmental regulation of foreign securities markets, and security trading
practices abroad may offer less protection to investors such as the Portfolio.
The value of such investments may be adversely affected by changes in
political or social conditions, diplomatic relations, confiscatory taxation,
expropriation, nationalization, limitation on the removal of portfolios or
assets, or imposition of (or change in) exchange control or tax regulations in
those foreign countries. Additional risks of foreign securities include
settlement delays and costs, difficulties in obtaining and enforcing judgments,
and taxation of dividends at the source of payment.
In addition, the Portfolio may invest in private placement commercial
paper. Private placement commercial paper consists of unregistered securities
which are traded in public markets to qualified institutional investors, such as
the Portfolio. The Portfolio's risk is that the universe of potential buyers for
the securities, should the Portfolio desire to liquidate a position, is limited
to qualified dealers and institutions, and therefore such securities could have
the effect of being illiquid.
The Subadviser intends to manage the Portfolio actively in pursuit of its
investment objective. The Portfolio does not expect to trade in securities for
short-term profits but, when circumstances warrant, securities may be sold
without regard to the length of time held.
PORTFOLIO TURNOVER
Because the Subadviser may employ flexible defensive investment strategies
when market trends are not considered favorable, the Subadviser may occasionally
change the entire portfolios in the Portfolio. High transaction costs could
result when compared with other funds. Trading may also result in realization of
net short-term capital gains upon which shareholders may be taxed at ordinary
tax rates when distributed from a Fund. This defensive investment strategy can
produce high portfolio turnover ratios when calculated in accordance with SEC
rules. The Utilities Stock Portfolio's annual portfolio turnover rate is not
expected
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to exceed 50%. The Portfolio had a portfolio turnover rate of 5% in 1995.
The Portfolio intends to comply with the short-term trading restrictions of
Subchapter M of the Internal Revenue Code of 1986, as amended, although these
restrictions could inhibit a rapid change in the Portfolio's investments.
THE TRUST AND ITS MANAGEMENT
The Trust was organized as a Massachusetts Business Trust on December 31,
1991 as the successor to a Pennsylvania Business Trust organized on April 30,
1982. Four of its five constituent funds are diversified open-end management
companies. The Muirfield Fund, is a non-diversified open-end management company.
The Trust's offices are at 6000 Memorial Drive, Dublin, OH 43017. The business
and affairs of the Trust are under the direction of its Board of Trustees.
The Trust has no investment adviser because the Trust seeks to achieve the
investment objective of each Fund by investing each Fund's assets in the
corresponding Portfolio. Each Portfolio has retained the services of R. Meeder &
Associates, Inc. as investment adviser.
R. Meeder & Associates, Inc. (the "Manager"), has been an investment
adviser to individuals and retirement plans since 1974. The Manager served as
the Trust's investment adviser from its inception in 1982 until May of 1992, at
which time the investment by the Funds in the Portfolios was implemented. The
Manager serves the Portfolios pursuant to Investment Advisory Contracts under
the terms of which it has agreed to provide an investment program within the
limitations of each Portfolio's investment policies and restrictions, and to
furnish all executive, administrative, and clerical services required for the
transaction of Portfolio business, other than accounting services and services
which are provided by each Portfolio's custodian, transfer agent, independent
accountants, legal counsel and investment advisory services provided by
Miller/Howard, Inc. the Subadviser to the Utilities Stock Portfolio.
The Manager was incorporated in Ohio in 1974 and maintains its principal
offices at 6000 Memorial Drive, Dublin, OH 43017. The Manager is a wholly-owned
subsidiary of Muirfield Investors, Inc. ("MII"). MII is controlled by Robert S.
Meeder, Sr. through ownership of voting common stock. MII conducts business only
through its five subsidiaries which are the Manager; Mutual Funds Service Co.,
the Trust's transfer agent; Opportunities Management Co., a venture capital
investor; Meeder Advisory Services, Inc., a registered investment adviser and
OMCO, Inc., is a registered commodity trading adviser and commodity pool
operator.
The Manager's officers and directors, their principal offices are as
follows: Robert S. Meeder, Sr., Chairman and Sole Director; Robert S. Meeder,
Jr., President; G. Robert Kincheloe, Senior Vice President; Philip A. Voelker,
Senior Vice President; Donald F. Meeder, Vice President and Secretary; Sherrie
L. Acock, Vice President; Robert D. Baker, Vice President; Wesley F. Hoag,
General Counsel and Chief Operating Officer; and Steven T. McCabe, Vice
President.
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The Manager earns an annual fee, payable in monthly installments, as
follows: The fee for each of the Growth Stock, Mutual Fund and Utilities Stock
Portfolios is at the rate of 1% of the first $50 million, 0.75% of the next $50
million, and 0.60% in excess of $100 million, of that Portfolio's average net
assets. These fees are higher than the fees charged to most other investment
companies. The fee for the Bond Portfolio is at the rate of 0.40% of the first
$100 million and 0.20% in excess of $100 million, of average net assets. The fee
for the Money Market Portfolio is at the rate of 0.40% of the first $100 million
and 0.25% in excess of $100 million, of average net assets.
The Manager presently intends to waive a portion of its management fees for
the Bond and Money Market Portfolios, but may change this policy at any time
without notice to shareholders. For planning purposes prospective investors and
shareholders should assume that expenses will be based on the maximum fees. (See
footnotes to "Synopsis of Financial Information.")
Accounting, stock transfer, dividend disbursing, and shareholder services
are provided to each Fund and Portfolio by Mutual Funds Service Co., 6000
Memorial Drive, Dublin, Ohio 43017, a wholly-owned subsidiary of MII. The
minimum annual fee for accounting services for the Growth Stock, Mutual Fund,
Utilities Stock and Bond Portfolios is $7,500. The minimum annual fee for the
Money Market Portfolio is $30,000. Subject to the applicable minimum fee, each
Portfolio's annual fee, payable monthly, is computed at the rate of 0.15% of the
first $10 million, 0.10% of the next $20 million, 0.02% of the next $50 million
and 0.01% in excess of $80 million of each Portfolio's average net assets.
Subject to a $4,000 annual minimum fee The Growth, Muirfield and Total
Return Utilities Funds incur the greater of $15 per shareholder account or 0.10%
of each Funds average net assets, payable monthly, for stock transfer and
dividend disbursing services. In The U.S. Government Bond Fund, this annual fee
is the greater of $15 per shareholder account or 0.06% of the Fund's average net
assets. The fee for The Money Market Fund is the greater of $20 per shareholder
account or 0.06% of the Fund's average net assets.
Mutual Funds Service Co. also serves as Administrator to the Trust pursuant
to an Administrative Services Agreement which was effective February 1, 1995.
Services provided to the Trust include coordinating and monitoring any third
party services to the Trust; providing the necessary personnel to perform
administrative functions for the Trust, assisting in the preparation, filing and
distribution of proxy materials, periodic reports to Trustees and shareholders,
registration statements and other necessary documents. Each Fund incurs an
annual fee, payable monthly, of 0.03% of each Fund's average net assets. These
fees are reviewable annually by the respective Trustees of the Trust and the
Portfolio. For the year ended December 31, 1995, total payments to Mutual Funds
Service Co. amounted to $469,144 for all of the Funds and Portfolios
collectively.
Pursuant to a Subadministrative Services Agreement with Mutual Funds
Service Co., Signature Broker-Dealer Services, Inc. ("Signature"), as
Subadministrator, is responsible for conducting certain day-to-day
administration of the Funds subject to the supervision and direction of Mutual
Funds Service Co.
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<PAGE> 36
Miller/Howard Investments, Inc. (the "Subadviser"), 141 Upper Byrdcliffe
Road, P.O. Box 549, Woodstock, New York 12498, serves as the Utilities Stock
Portfolio's Subadviser under an Investment Subadvisory Agreement between the
Manager and the Subadviser. The Subadviser furnishes investment advisory
services in connection with the management of the Utilities Stock Portfolio. The
Subadviser is compensated for its services by the Manager in an amount equal to
90% of the investment advisory fees received by the Manager under its investment
advisory agreement with the Utilities Stock Portfolio, provided that if a
shareholder purchasing shares in the Fund was solicited by the Manager, the
Subadviser is compensated by the Manager in an amount equal to 60% of the
investment advisory fees received by the Manager with respect to such
shareholder. The Manager continues to have responsibility for all investment
advisory services in accordance with the investment advisory agreement and
supervises the Subadviser's performance of such services.
The Subadviser, a Delaware corporation, is a registered investment adviser
which has been providing investment services to broker-dealers, investment
advisers, employee benefit plans, endowment portfolios, foundations and other
institutions and individuals since 1984. As of December 31, 1995, the Subadviser
held discretionary investment authority over approximately $195 million of
assets. The Subadviser is controlled by Lowell Miller. Lowell Miller, a director
and the President of the Subadviser, is a Trustee of The Flex-Partners, mutual
funds whose corresponding portfolios are also advised by the Manager.
The Manager or the Subadviser may take into account sales of shares of
the Funds and other funds advised by the Manager in selecting broker-dealers to
effect portfolio transactions on behalf of the Portfolios.
A broker-dealer may use a portion of the commissions paid by a
Portfolio to reduce the Portfolio or its corresponding Fund's expenses.
Information concerning the Trustees and officers of both the Trust and the
Portfolios appears in the Statement of Additional Information.
PORTFOLIO MANAGERS
The individuals primarily responsible for the management of each of the
Portfolios are listed below:
Robert S. Meeder, Jr. has been primarily responsible for the day-to-day
management of the Mutual Fund and Growth Stock Portfolios. Mr. Meeder, a Trustee
and Vice President of The Flex-funds is Vice President of each Portfolio and
President/Portfolio Manager of R. Meeder & Associates ("the Manager"). Mr.
Meeder has been associated with the Manager since 1983 and has managed the
Mutual Fund and Growth Stock Portfolios since 1988 and 1993, respectively.
Lowell G. Miller is the portfolio manager primarily responsible for the
day-to-day mangement of the Utilities Stock Portfolio. Mr. Miller is the
President of the Subadviser. Mr. Miller has been associated with the Subadviser
since 1984, has managed the Utilities Stock Portfolio since its inception in
1995 and controls the Subadviser through ownership of voting common stock.
G. Robert Kincheloe is the portfolio manager primarily responsible for the
day-to-day management of the Bond Portfolio. Mr. Kincheloe is Senior Vice
President of the Manager and began managing the Bond Portfolio in 1994. Mr.
Kincheloe was a Senior Vice President with Advest from 1987 to 1993. Mr.
Kincheloe has been associated with the Adviser since 1993.
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<PAGE> 37
Philip A. Voelker is primarily responsible for the day-to-day management of
the Money Market Portfolio. Mr. Voelker is Vice President and Trustee of the
Money Market Portfolio, Vice President of The Flex-funds and Senior Vice
President of the Manager. Mr. Voelker has been associated with the Manager since
1975 and managed the Portfolio since 1985.
DISTRIBUTION PLANS
The Trust has adopted distribution expense plans (the "Plans") which
authorize each Fund to bear a portion of the expense of any activity which is
primarily intended to result in the sale of Fund shares. The Plans permit, among
other things, payment for distribution in the form of commissions and fees,
advertising, the services of public relations consultants, and direct
solicitation. Possible recipients include securities brokers, attorneys,
accountants, investment advisers, investment performance consultants, pension
actuaries, banks, and service organizations, all of them being hereafter
referred to as "Consultants."
The Trust may expend in the Growth, Muirfield, U.S. Government Bond and
Money Market Funds as much as, but not more than, 2/10 of 1% of each Fund's
average net assets annually pursuant to the Plans. In the Total Return Utilities
Fund, the Trust may expend up to 25/100 of 1% of the Funds average net assets.
Each Plan was approved by the Board of Trustees, who made a determination
that there is a reasonable likelihood that the Plans will benefit the Trust.
The Trust has entered into agreements whereby Consultants (including two
Trustees of the Portfolios) are paid for their assistance in explaining and
interpreting the Trust, its investment objectives and policies, and its
retirement plans, to their clients. Under these agreements, Consultants are paid
quarterly compensation by the Trust on the average value of shares held by their
clients. Although the compensation is thus seen to be continuing, the Trust
retains the right to terminate any Consultant's agreement on 60 days' notice,
without further obligation beyond the date of termination.
Although the objective of the Trust is to pay Consultants for a portion of
the expenses they incur, and to provide them with some incentive to be of
assistance to the Trust and its shareholders, no effort has been made to
determine the actual expenses incurred by Consultants. If any Consultant's
expenses are in excess of what the Trust pays, such excess will not be paid by
the Trust. Conversely, if the Consultant's expenses are less than what the Trust
pays, the Consultant is not obligated to refund the excess, and this excess
could represent a profit for the Consultant.
Total payments made under each Plan in 1995, here given as a percentage of
average net assets, amounted to 0.13% in The Growth Fund; 0.13% in The Muirfield
Fund; 0.10% in The Total Return Utilities Fund; 0.17% in The U.S. Government
Bond Fund; and 0.08% in The Money Market Fund. (See "Synopsis of Financial
Information.")
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INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTION, AND TAXES
THE GROWTH FUND, THE MUIRFIELD FUND, THE U.S. GOVERNMENT BOND
FUND AND THE MONEY MARKET FUND
It is the policy of the Trust to distribute substantially all of its net
income. A Fund's net income consists of the income it earns from its investment
in the corresponding Portfolio, less expenses. Each Fund also intends to
distribute its net capital gains, if any, to its shareholders annually.
In The U.S. Government Bond Fund, net income is calculated daily and
declared as a dividend to shareholders of record at the close of the previous
business day. In The Money Market Fund, net income is calculated daily and
declared as a dividend to shareholders of record at the close of the previous
business day, and to the holders of shares purchased that same day prior to 3:00
p.m., with one exception. If a shareholder requests a redemption and the request
is received by 3:00 p.m., then the shares so redeemed that day will not be paid
that day's dividend. Net income earned by these two Funds on a weekend or a
holiday is declared as a dividend on Friday or the day prior to the holiday. All
such dividends of net income are automatically reinvested in additional shares
at the net asset value on the last business day of each month. A shareholder may
elect to receive such dividends in cash either by checking the appropriate box
on the New Account Application, or by notifying the Trust in writing. If the
entire account of a shareholder is withdrawn, all dividends accrued at the time
of withdrawal will be paid at that time.
The Growth and Muirfield Funds declare and pay dividends from net
investment income, if any, on a quarterly basis.
The Internal Revenue Code of 1986 imposes on the Trust a nondeductible
excise tax unless the Trust distributes annually at least 98% of its net
investment income earned during the calendar year, at least 98% of capital gain
net income realized in the 12 months preceding October 31, and any undistributed
balances from the previous year. In addition, the Tax Reform Act of 1986 (the
"Tax Act") provides that any dividend declared by a Fund in October, November,
or December and paid in January will be deemed to have been paid by the Fund and
to have been received by each shareholder in December. Distribution dates and
the amounts paid, if any, are subject to determination by the Board of Trustees.
Dividends and capital gains distributions are ordinarily taxable to
shareholders in the year distributed. However, under the Tax Act, the Trust is
permitted to make distributions up to February 1 and have them apply to the
previous tax year. The Trust expects to make such a distribution in The
Muirfield Fund in future years.
A shareholder is taxed on capital gains and income realized by the Trust,
regardless of the length of time he has been a shareholder. Thus a shareholder
may receive capital gains distributions shortly after purchasing shares, and
this will reduce the market value of the shares by the amount of the
distribution. The shareholder will not be able to recognize the resultant loss
in value for tax purposes until the shares are sold at a later date. In the case
of some mutual funds this effect can be substantial. In the case of The Growth,
Muirfield and
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U.S. Government Bond Funds, each of which frequently liquidates its portfolio
for defensive purposes and therefore tends not to realize large capital gains
accumulated over a long period of time, the effect is not expected to be
substantial.
Dividends and capital gains distributions are taxable to the shareholder
whether received in cash or reinvested in additional shares. Shareholders not
otherwise subject to tax on their income will not be required to pay tax on
amounts distributed to them. Each Shareholder will receive a statement annually
informing him of the amount of the income and capital gains which have been
distributed during the calendar year.
The Trust files federal income tax returns for each of the Funds. Each Fund
is treated as a separate entity for federal income tax purposes. The Trust also
intends to comply with Subchapter M of the Internal Revenue Code, which imposes
such restrictions as (1) appropriate diversification of its portfolio of
investments; (2) realization of 90% of its annual gross income from dividends,
interest, and gains from the sale of securities and (3) realization of less than
30% of gross income from gains on the sale of securities held less than three
months. A Fund might deviate from this policy, and incur a tax liability, if
this were necessary to fully protect shareholder values. The Trust qualified as
a "regulated investment company" for each of the last thirteen fiscal years.
The foregoing discussion of taxes is limited to federal income taxes.
Distributions, whether in cash or in kind may be subject to state and local
taxes. Shareholders are urged to consult their tax advisers regarding specific
questions relating to federal, state, and local taxes.
The Trust is required to withhold and remit to the federal government 31%
of any reportable payments (which may include dividends, capital gains
distributions, if any, and redemptions) paid to certain shareholders. In order
to avoid this withholding requirement, each shareholder must certify on the New
Account Application that the social security or taxpayer identification number
is correct and that the shareholder is not currently subject to backup
withholding or is exempt from backup withholding.
The Trust may refuse to sell shares to investors who have not complied with
these requirements, either before or at the time of purchase. Until we receive
your certified TIN, we may redeem your shares at any time.
INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTION, AND TAXES
THE TOTAL RETURN UTILITIES FUND
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
The Total Return Utilities Fund's dividends are distributed at the end of
the month and declared payable to shareholders on the last business day of the
month to shareholders of record as of the previous business day. In December,
the Fund may distribute an additional ordinary income dividend (consisting of
net short-term capital gains and undistributed income) in order to preserve its
status as a registered investment company (mutual fund) under the Internal
Revenue Code. Net long-term capital gains, if any, also are declared and
distributed
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in December.
DISTRIBUTION OPTIONS
You may choose to receive dividends and capital gain distributions in cash
or to reinvest them in additional shares. Please indicate your choice on your
New Account Application or contact the Transfer Agent. If you elect to receive
dividends or capital gain distributions in cash and the U.S. Postal Service
returns your checks to us, the checks will be reinvested in your account at the
Fund's then-current net asset value. Until we receive instructions to the
contrary, subsequent distributions will be reinvested in your account. In
addition, we may reinvest, at the Fund's then-current net asset value, any
distribution checks that remain uncashed for six months.
TAXES
The Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code by distributing all, or substantially
all, of its net investment income and net realized capital gains to shareholders
each year.
The Fund's dividends and capital gain distributions are subject to federal
income tax whether they are received in cash or reinvested in additional shares.
Distributions declared in December and paid in January of the following year are
taxable as if they were paid on December 31.
Dividends from net investment income (including net short-term capital
gains, if any) are taxable as long-term capital gains, regardless of how long
you have held your shares.
A portion of the Fund's dividends may qualify for the dividends-received
deduction available to corporations. The Fund will send you a tax statement by
January 31 showing the tax status of distributions you received in the previous
year and will file a copy with the IRS.
You may realize a capital gain or loss when you redeem (sell) or exchange
shares of the Fund. For most types of accounts, the proceeds from your
redemption transactions will be reported to you and the IRS annually. However,
because the tax treatment depends on your purchase price and personal tax
position, you should keep your regular account statements to use in determining
your taxes.
"BUYING A DIVIDEND"
Although it is less likely with a fund such as the Total Return Utilities
Fund, which pays monthly dividends, the timing of your investment could have
undesirable tax consequences.
If you opened a new account or bought more shares for your current account
just before the day a dividend or capital gain distribution was reflected in the
Fund's share price, you would receive a portion of your investment back as a
taxable distribution. This practice is sometimes referred to as "buying a
dividend."
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BACKUP WITHHOLDING
The Fund is required by federal law to withhold 31% of reportable
dividends, capital gain distributions, or redemptions payable to shareholders
who have not complied with IRS regulations. To avoid this withholding
requirement, you must certify on your account application (or on IRS Form W-9)
that your social security or taxpayer identification number (TIN) is correct and
that you are not subject to back-up withholding for previous under-reporting to
the IRS, or that you are exempt from backup withholding.
The Fund may refuse to sell shares to investors who have not complied with
these requirements either before or at the time of purchase. Until we receive
your certified TIN, we may redeem your shares in the Fund at any time.
HOW NET ASSET VALUE IS DETERMINED
Except in The U.S. Government Bond Fund, net asset value per share (the
price at which shares are purchased and redeemed) is determined at each closing
of the New York Stock Exchange each day the Exchange is open for business and
each other day during which there is a sufficient degree of trading that the
current net asset value of a Fund's shares might be materially affected by
changes in the value of the securities held by a Fund's corresponding Portfolio.
In The U.S. Government Bond Fund, the net asset value per share will be
calculated each such day on the basis of portfolio values at 3:00 p.m. Eastern
time. The U.S. Government Bond and Money Market Fund shares will not be priced
on Good Friday or on any holiday observed by the Federal Reserve system. These
presently include New Year's Day, Martin Luther King Day, President's Day,
Columbus Day, Veterans Day, Thanksgiving Day and Christmas Day. Net asset value
is obtained by dividing the value of a Fund's assets (i.e., the value of its
investment in the corresponding Portfolio and other assets), less liabilities,
by the total number of its shares of beneficial interest outstanding at the
time.
OTHER INFORMATION
SHARES OF BENEFICIAL INTEREST
The Trust's Declaration of Trust permits the Trust to offer and sell an
unlimited number of full and fractional shares of beneficial interest in each of
the Trust's existing Funds and to create additional Funds. All shares have a par
value of $.10 per share, are fully paid, nonassessable and fully transferable
when issued. All shares are issued as full or fractional shares.
A fraction of a share has the same rights and privileges as a full share.
Each Fund of the Trust will issue its own series of shares of beneficial
interest. The shares of each Fund represent an interest only in that Fund's
assets (and profits or losses) and in the event of liquidation, each share of a
particular Fund would have the same rights to dividends and assets as every
other share of that Fund.
Each full or fractional share has a proportionate vote. On some issues,
such as the election
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of Trustees, all shares of the Trust vote together as one series. On an issue
affecting a particular Fund, only its shares vote as a separate series. An
example of such an issue would be a fundamental investment restriction
pertaining to only one Fund. In voting on a Distribution Plan, approval of the
Plan by the shareholders of a particular Fund would make the Plan effective as
to that Fund, whether or not it had been approved by the shareholders of the
other Funds.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
When matters are submitted for shareholder vote, shareholders of each Fund
will have one vote for each full share held and proportionate, fractional votes
for fractional shares held. A separate vote of a Fund is required on any matter
affecting the Fund on which shareholders are entitled to vote. Shareholders of
one Fund are not entitled to vote on a matter that does not affect that Fund but
that does require a separate vote of any other Fund. There normally will be no
meetings of shareholders for the purpose of electing Trustees unless and until
such time as less than a majority of Trustees holding office have been elected
by shareholders, at which time the Trustees then in office will call a
shareholders' meeting for the election of Trustees. Any Trustee may be removed
from office upon the vote of shareholders holding at least two-thirds of the
Trust's outstanding shares at a meeting called for that purpose. The Trustees
are required to call such a meeting upon the written request of shareholders
holding at least 10% of the Trust's outstanding shares. Shareholders have under
certain circumstances (e.g., upon application and submission of certain
specified documents to the Trustees of a Fund by a specified number of
shareholders) the right to communicate with other shareholders in connection
with requesting a meeting of shareholders for the purpose of removing one or
more Trustees.
Each Portfolio, in which all the assets of a corresponding Fund will be
invested, is organized as a trust under the laws of the State of New York. Each
Portfolio's Declaration of Trust provides that a Fund and other entities
investing in that Portfolio (e.g., other investment companies, insurance company
separate accounts, and common and commingled trust funds) will each be liable
for all obligations of that Portfolio. However, the risk of a Fund incurring
financial loss on account of such liability is limited to circumstances in which
both inadequate insurance existed and that Portfolio itself was unable to meet
its obligations. Accordingly, the Trustees of the Trust believe that neither a
Fund nor its shareholders will be adversely affected by reason of a Fund's
investing in the corresponding Portfolio. In addition, whenever the Trust is
requested to vote on matters pertaining to the fundamental policies of a
Portfolio, the Trust will hold a meeting of the corresponding Fund's
shareholders and will cast its vote as instructed by the Fund's shareholders.
INVESTMENT STRUCTURE
Unlike other mutual funds which directly acquire and manage their own
portfolio of
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securities, each Fund seeks to achieve its investment objectives by investing
all of its assets in a corresponding Portfolio, a separate registered investment
company with the same investment objectives as the Fund. Therefore, an
investor's interest in the Portfolio's securities is indirect. In addition to
selling a beneficial interest to the Fund, the Portfolio may sell beneficial
interests to other mutual funds or institutional investors. Such investors will
invest in the Portfolio on the same terms and conditions and will pay a
proportionate share of the Portfolio's expenses. However, the other investors
investing in the Portfolio are not required to sell their shares at the same
public offering price as the Fund. Investors in the Fund should be aware that
these differences may result in differences in returns experienced by investors
in the different funds that invest in the Portfolio. Such differences in returns
are also present in other mutual fund structures. Information concerning other
holders of interests in the Portfolio is available by contacting the Trust by
calling: 1-800-325-FLEX, or (614) 766-7000.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may experience higher pro rata
operating expenses, thereby producing lower returns. Additionally, the Portfolio
may become less diverse, resulting in increased portfolio risk.
(However, this possibility also exists for traditionally structured funds
which have large or institutional investors.) Also, funds with a greater pro
rata ownership in the Portfolio could have effective voting control of the
operations of the Portfolio. Whenever the Trust is requested to vote on matters
pertaining to the Portfolio, the Trust will hold a meeting of shareholders of
the Fund and will cast all of its votes in the same proportion as do the Fund's
shareholders. Certain changes in the Portfolio's investment objectives, policies
or restrictions may require the Trust to withdraw the Fund's interest in the
Portfolio. Any such withdrawal could result in a distribution in kind of
portfolio securities (as opposed to a cash distribution from the Portfolio). If
such securities are distributed, the Fund could incur brokerage, tax or other
charges in converting the securities to cash. In addition, the distribution in
kind may result in a less diversified portfolio of investments or adversely
affect the liquidity of the Fund.
The Trust may withdraw the investment of any Fund from its corresponding
Portfolio at any time, if the Board of Trustees of the Trust determines that it
is in the best interests of the Fund to do so. Upon any such withdrawal, the
Board of Trustees would consider what action might be taken, including the
investment of all the assets of the Fund in another pooled investment entity
having the same investment objectives as that Fund or the retaining of an
investment adviser to manage the Fund's assets in accordance with the investment
policies with respect to that Fund's corresponding Portfolio. The inability to
find an adequate investment pool or investment adviser could have a significant
impact on shareholders' investment in the Fund.
As stated in "Investment Objectives and Policies," a Fund's investment
objectives and policies are not fundamental and may be changed by Trustees
without shareholder approval. (No such change would be made, however, without 30
days' written notice to shareholders.)
For descriptions of the investment objectives and policies of the
Portfolio, see "Investment
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Objectives and Policies" and "Additional Investment Policies." For descriptions
of the management and expenses of the Portfolios, see "The Trust and Its
Management" herein, and "Investment Adviser and Manager" and "Officers and
Trustees" in the Statement of Additional Information.
HOW TO BUY SHARES
Shares are offered continuously and sold without a direct sales charge,
although the Trust does pay some consultants for services in explaining the
Funds, their investment policies and restrictions, and retirement plans to their
clients. (See "Distribution Plans" and "Synopsis of Financial Information".)
Shares of The Growth Fund are purchased at net asset value per share next
determined after receipt of the purchase order by Mutual Funds Service Co., the
Fund's transfer agent, or an authorized service agent or sub-agent of the Funds.
Shares of The Muirfield, Total Return Utilities and U.S. Government Bond Funds
are sold at net asset value per share next determined after receipt of both a
purchase order and payment by the Fund's transfer agent or the Funds' authorized
service agent or sub-agent. Shares of The Money Market Fund are sold at the net
asset value per share next determined after receipt of both a purchase order and
payment in federal funds. Investments made by check are entered and credited at
the net asset value determined on the next business day following receipt. Net
asset value generally changes each day, except in The Money Market Fund, which
intends to maintain a constant net asset value of $1.00 per share. (See "How Net
Asset Value Is Determined.")
Minimum Investment--The minimum investment to open an account in each Fund
is $2,500 except an Individual Retirement Account (IRA) which has a $500
minimum. Subsequent investments in any account may be made in amounts of at
least $100.
Opening an Account--You may open an account by mail or bank wire as
follows:
By Mail: To purchase shares, fill out the New Account Application
accompanying this Prospectus. Be sure to specify the name of the Fund in
which you wish to invest. A check payable to each Fund you specify must
accompany the New Account Application. Payments may be made by check or
Federal Reserve Draft payable to the particular Fund(s) specified on the
application (The Growth Fund, Muirfield, etc.) and should be mailed to the
following address: THE FLEX-FUNDS, C/O R. MEEDER & ASSOCIATES, INC., P.O.
BOX 7177, DUBLIN, OHIO 43017
By Bank Wire: If the wire order is for a new account in the Trust, or to
open an account in a different Fund, you must telephone the Fund prior to
making your initial investment. Call 1-800-325-FLEX, or (614) 766-7000.
Advise the Fund of the amount you wish to invest and obtain an account
number and instructions. Money sent by a single wire can only be invested
in one Fund. Have your bank wire federal funds to:
STAR BANK, N.A. CINTI/TRUST
ABA #: 042-00001-3
ATTENTION: THE FLEX-FUNDS
(AND NAME OF FUND--SEE BELOW)
Credit Account Number(account number for Fund as follows):
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Growth Fund--
Account Number 9304932
Muirfield Fund--
Account Number 9305731
Total Return Utilities Fund--
Account Number 483608915
U.S. Government Bond Fund--
Account Number 9305152
Money Market Fund--
Account Number 9305533
Account Name (your name)
Personal Account No. (your Flex-funds account number)
On new accounts, a completed application must be sent to The Flex-funds c/o
R. Meeder & Associates, Inc., P.O. Box 7177, Dublin, OH 43017 on the same day
your wire is sent. The Trust will not permit redemptions until it receives the
New Account Application in good order.
SUBSEQUENT INVESTMENTS--Subsequent investments in an existing account in
any Fund may be made by mailing a check payable to: Growth Fund; Muirfield Fund;
Total Return Utilities Fund; U.S. Government Bond Fund; or Money Market Fund.
Please include your account number on the check and mail as follows:
THE FLEX-FUNDS
LOCATION NUMBER: 00215
CINCINNATI, OH 45264-0215
Subsequent investments may also be made by bank wire as described above. It
is necessary to notify the Fund prior to each wire purchase. Wires sent without
notifying the Fund will result in a delay of the effective date of your
purchase.
AUTOMATIC ACCOUNT BUILDER--Periodic investments in an existing account can
be made by selecting this option. (See "Other Shareholder Services.")
WHEN PURCHASES ARE EFFECTIVE--New Account Applications for The Growth Fund,
when accompanied by payment, are accepted immediately and the shares are priced
at the next determined net asset value per share. Subsequent purchase orders are
handled the same way, except on purchases made by telephone, payment is due
within three business days. Shares of The Muirfield, Total Return Utilities and
U.S. Government Bond Funds are sold at net asset value per share next determined
after receipt of both a purchase order and payment. Income dividends in The U.S.
Government Bond Fund begin as of the first business day following the day of
purchase.
New Account Applications and subsequent purchase orders for The Money
Market Fund which are received by or on behalf of the Fund prior to 3:00 p.m.,
Eastern time on a business day, begin earning dividends that day, provided
payment in federal funds (bank wire) is
42
<PAGE> 46
received by the bank that day. New Account Applications and subsequent purchase
orders which are received after 3:00 p.m., or for which wire payment is not
received, are accepted as a purchase the following day. Investments made by
check are credited to shareholder accounts, and begin to earn dividends, on the
next business day following receipt.
If a shareholder's check is dishonored, the purchase and any dividends paid
thereon will be reversed. If shares are purchased with federal funds, they may
be redeemed at any time thereafter and the shareholder may secure his funds as
explained below. (See "How to Make Withdrawals (Redemptions).") However, if
shares are purchased by check(s) or the Automatic Account Builder, Mutual Funds
Service Co. will delay payment of redemption proceeds until the check used to
purchase shares, or Automatic Account Builder order, has cleared which could be
fifteen (15) calendar days or more subsequent to the purchase of the shares. The
Fund will forward the proceeds promptly once the check has cleared.
FINANCIAL INSTITUTIONS You may buy shares or sell shares of the Funds
through a broker or financial institution who may charge you a fee for this
service. If you are purchasing shares of a Fund through a program of services
offered or administered by a securities dealer or financial institution, you
should read the program materials in conjunction with this Prospectus.
Certain financial institutions that have entered into sales agreements with
the Trust may enter confirmed purchase orders on behalf of customers by
telephone to purchase shares of The Muirfield, Total Return Utilities and U.S.
Government Bond Funds. Payment is due no later than the Fund's pricing on the
following business day. In The Growth Fund, payment for confirmed purchase
orders is due within three business days. Purchase orders for The Money Market
Fund which are received prior to 3:00 p.m., Eastern time, begin earning
dividends that day, provided Star Bank, N.A., the Custodian for the Fund,
receives federal funds by 4:00 p.m., Eastern time, that same day. If payment for
the purchase of shares is not received in a timely manner, the financial
institution could be held liable for any loss incurred by a Fund.
HOW TO MAKE WITHDRAWALS (REDEMPTIONS)
Shares are redeemed and funds withdrawn at net asset value per share, and
there are no redemption fees. (See "How Net Asset Value Is Determined.")
BY MAIL--A shareholder may redeem shares by mailing a written request in
good order to The Flex-funds, c/o R. Meeder and Associates, Inc., P.O. Box 7177,
Dublin, OH 43017. Good order means that the request must be signed by the
shareholder(s) and the signature(s) must be guaranteed by an eligible guarantor
institution (a bank, broker-dealer, credit union, securities exchange and
association, clearing agency and savings association). The Trust does not accept
signatures guaranteed by a notary public. Further documentation may be required
as to the authority of the person requesting redemption of shares held of record
in the name of corporations, executors, administrators, trustees, guardians or
other fiduciaries. The Trust may waive these requirements in certain instances.
43
<PAGE> 47
Amounts withdrawn are mailed without charge to the address printed on your
account statement.
BY TELEPHONE--A shareholder may redeem by telephone: 1-800-325-FLEX, or
call (614) 766-7000. Shareholders who wish to use this procedure must so elect
on the New Account Application. Amounts withdrawn from an account by telephone
are mailed without charge to the address printed on the shareholder's account
statement.
As a special service, a shareholder may arrange to have amounts in excess
of $1,000 wired in federal funds to a designated commercial bank account. To use
this procedure please designate on the New Account Application a bank and bank
account number to receive the proceeds of wire withdrawals. There is no charge
for this service.
A shareholder may change the bank account designated to receive
redemptions. This may be done at any time upon written request to the Trust. The
shareholder's signature must be guaranteed. Further documentation may be
required from corporations, executors, administrators, trustees, guardians, or
other fiduciaries.
Neither the Trust nor Mutual Funds Service Co. ("MFSCo") will be
responsible for any loss, expense, or cost arising from any telephone redemption
request made according to the authorization set forth in the New Account
Application if they reasonably believe such request to be genuine and follow
reasonable procedures designed to verify the identity of the person requesting
the redemption. If MFSCo fails to follow reasonable procedures MFSCo or the
Trust may be liable for losses due to unauthorized or fraudulent transactions.
MFSCo will provide each investor seeking telephone redemption privileges with a
personalized security code which, along with other information, will be required
of the caller upon request of a telephone redemption. Other information may also
be required and calls may be recorded.
WHEN REDEMPTIONS ARE EFFECTIVE--Redemptions are made at the net asset value
per share next determined after receipt of a redemption request in good order.
(See "How Net Asset Value Is Determined.")
WHEN PAYMENTS ARE MADE--Amounts withdrawn by telephone are normally mailed
or wired on the next Columbus, Ohio bank business day following the effective
date of the order for withdrawal. In The Money Market Fund, if a request for a
wire redemption is received prior to 3:00 p.m., Eastern time, on a bank business
day, funds will be wired on the same day. Amounts withdrawn by mail are normally
sent by mail within one business day after the request is received, and must be
mailed within seven days with the following exception. If shares are purchased
by check, Mutual Funds Service Co. will not pay a redemption until reasonably
satisfied the check used to purchase shares has been collected which could be
fifteen (15) calendar days or more after shares are first paid for, unless
payment was made with federal funds. The Fund will forward proceeds promptly
once the check has cleared. (See "How to Buy Shares.")
CHECK-WRITING REDEMPTION PROCEDURE--MONEY MARKET FUND ONLY:
Mutual Funds Service Co., as Dividend Disbursing and Transfer Agent for The
Money
44
<PAGE> 48
Market Fund, will provide a supply of drafts to any shareholder when requested.
Drafts are mailed to the shareholder's address of record normally within two
weeks following the date of the initial investment. These drafts may be used to
draw against the shareholder's Money Market Fund account. Drafts may be written
in any amount not less than $100. To use this privilege an investor must
complete the check-writing redemption provision of the New Account Application
form and complete the signature card, or notify the Trust after making an
initial investment.
A commercial check package consisting of 300 drafts is available for a
nominal charge. Shareholders interested in a commercial check package should
contact the Trust for additional information.
When a draft is presented to the Bank for payment, the Bank (as agent for
the shareholder) will cause the Fund to redeem sufficient shares to cover the
amount of the draft. Shares continue earning dividends until the day on which
the draft is presented to the Bank for payment. Due to the delay caused by the
requirement that redemptions be priced at the next computed net asset value, the
Bank will only accept drafts for payment which are presented through normal bank
clearing channels. If shares are purchased by check, Mutual Funds Service Co.
will return drafts drawn on funds from purchases made by check(s), or any
portion thereof, until the check(s) used to purchase shares has cleared, which
may take up to fifteen (15) calendar days, or more. If you anticipate draft
redemptions soon after you purchase shares, you are advised to wire funds to
avoid the return of any draft(s). If the amount of the draft is greater than the
value of the shares held in a shareholder's account, the draft will be returned
and the shareholder's account will be charged a fee of $15. To avoid the
possibility that a draft may not be accepted due to insufficient share balances,
no shareholder should attempt to withdraw the full amount of an account or to
close out an account by using this procedure. Neither the Trust, The Money
Market Fund, Mutual Funds Service Co., nor the Bank, will be liable for any loss
or expenses associated with returned drafts. Use of this procedure will be
subject to the Bank's rules and regulations governing checking accounts.
Shareholders may request a stop payment on any draft and Mutual Funds
Service Co. will attempt to carry out your request. Mutual Funds Service Co.
cannot guarantee that such efforts will be successful. As the Bank charges the
Trust for this service, the shareholder's account will be charged a $12.50 fee
for any such request that becomes effective. No charge, other than those
specified above, will be made to a shareholder for participation in the
check-writing redemption procedure or for the clearance of any drafts.
EXCHANGE PRIVILEGE
A shareholder may exchange shares of any Fund for shares of any other Fund
that are available for sale in your state at their respective net asset values.
Exchanges are subject to applicable minimum initial and subsequent investment
requirements. It will be necessary to complete a separate New Account
Application if:
1. a shareholder wishes to register a new account in a different name;
2. a shareholder wishes to add telephone redemption to an account; or
45
<PAGE> 49
3. a shareholder wishes to have check-writing redemption privileges in a
Money Market Fund account.
Exchange requests may be directed to the Trust by telephone or written
request. If a shareholder request is in valid form, and is accepted before the
close of the Trust's business day, shares will be exchanged that day. Exchange
requests from The Money Market Fund to another Fund of the Trust must be
received prior to 3:00 p.m., Eastern time, to be exchanged that day. Otherwise,
they will be exchanged the next business day.
BY MAIL:
Exchange requests may also be made in writing and should be sent to The
Flex-funds, c/o R. Meeder & Associates, Inc., P.O. Box 7177, Dublin, Ohio 43017.
The letter must be signed exactly as the shareholder's name appears on the
Fund's account records.
BY TELEPHONE:
Exchange requests may be made by telephone: call 1-800-325-FLEX, or call
(614) 766-7000. You may make exchanges by telephone if you have telephone
redemption privileges for your current investment account and the registration
of additional accounts will be identical. Neither the Trust nor Mutual Funds
Service Co. will be responsible for any loss, expense, or cost arising from any
telephone redemption request made according to the authorization set forth in
the New Account Application if they reasonably believe such request to be
genuine and follow reasonable procedures designed to verify the identity of the
person requesting the redemption. If MFSCo fails to follow reasonable procedures
MFSCo or the Trust may be liable for losses due to unauthorized or fraudulent
transactions. MFSCo will provide each investor seeking telephone redemption
privileges with a personalized security code which, along with other
information, will be required of the caller upon request of a telephone
redemption. Other information may also be required and calls may be recorded.
Any exchange involves a redemption of all or a portion of the shares in one
Fund and an investment of the redemption proceeds in shares of one of the other
Funds. The exchange will be based on the respective net asset values of the
shares involved, ordinarily at the value next determined after the request is
received. An exchange may be delayed briefly if redemption proceeds will not be
available immediately for purchase of newly acquired shares. The exchange
privilege may be modified or terminated at any time. The exchange privilege is
designed to accommodate changes in shareholder investment objectives. In
addition, the Trust reserves the right to reject any exchange request and to
limit a shareholder's use of the exchange privilege.
The exchange of shares of one Fund for shares of another Fund is treated
for federal income tax purposes as a sale of the shares given in exchange. A
shareholder may realize a taxable gain or loss on an exchange, and he should
consult his tax adviser for further information concerning the tax consequences
of an exchange.
46
<PAGE> 50
FLEX-FUNDS RETIREMENT PLANS
The Trust offers retirement plans which include a prototype Profit Sharing
Plan, a Money Purchase Pension Plan, a Salary Savings Plan-401(K), an
Individual Retirement Account (IRA), and a Simplified Employee Pension (SEP)
Plan. Plan Adoption Agreements and other information required to establish a
Flex-funds Retirement Plan are available from The Flex-funds, c/o R. Meeder &
Associates, Inc., P.O. Box 7177, Dublin, Ohio 43017; or call 1-800-325-FLEX, or
call (614) 766-7000.
Minimum purchase requirements for retirement plan accounts are subject to
the same requirements as regular accounts, except for an IRA, which has a
reduced minimum purchase requirement. (See "How to Buy Shares.")
OTHER SHAREHOLDER SERVICES
AUTOMATIC ACCOUNT BUILDER: Regular investments in any Fund of $100 or more
will be deducted from a shareholder's checking or savings account and invested
in shares of the Fund(s) selected. A shareholder's bank must be a member of the
Automated Clearing House (ACH). Shareholders wishing to add to their investment
account must complete the Automatic Account Builder section of the New Account
Application. There is no charge for this service.
SYSTEMATIC WITHDRAWAL PROGRAM: A Systematic Withdrawal Program is offered
for any investor who wishes to receive regular distributions from his account.
The investor must either own or purchase shares having a value of at least
$10,000 and advise the Trust in writing of the amount to be distributed and the
desired frequency, i.e., monthly, quarterly or annually. This option may be
exercised by completing the appropriate section of the New Account Application.
The investor should realize that if withdrawals exceed income dividends, the
invested principal may be depleted. The investor may make additional investments
and may change or stop the program at any time. There is no charge for this
program.
SUB-ACCOUNTING FOR INSTITUTIONAL INVESTORS: The Trust's optional
sub-accounting system offers a separate shareholder account for each participant
and a master account record for the institution. Share activity is thus recorded
and statements prepared for both individual sub-accounts and for the master
account. For more complete information concerning this program contact the
Trust.
DISTRIBUTOR: Shares of the Funds are sold by the Trust itself in those
states where its shares have been registered for sale or a valid exemption
exists. States where registration or an exemption exists can be obtained by
calling 1-800-325-FLEX or (614) 766-7000.
SHAREHOLDER ACCOUNTS
The Trust maintains an account for each shareholder in full and fractional
shares. The Trust reserves the right to reject any purchase order, and to waive
minimum purchase requirements.
47
<PAGE> 51
CONFIRMATION STATEMENTS--In The Growth, Muirfield, Total Return Utilities
and U.S. Government Bond Funds all purchase and sale transactions, and dividend
reinvestments, are confirmed promptly after they become effective. In The Money
Market Fund you will receive a statement of your account confirming your initial
purchase of shares. Thereafter, you will receive a monthly confirmation
statement which contains a summary of transactions for the month as well as
dividend reinvestment information. Monthly statements are mailed promptly after
the last business day of the month. A shareholder may elect to receive a
confirmation statement after each transaction by notifying the Trust.
ACCOUNTS BELOW MINIMUMS--The Trust reserves the right to redeem shares in
any account for their then current net asset value and pay the proceeds to the
shareholder if at any time the account has shares valued at less than $1,000 as
a result of redemptions by the shareholder. The Trust also reserves the right to
redeem the shares in any account which may have been opened under a waiver of
minimum purchase requirements if sufficient additional shares were not
subsequently purchased to meet these requirements. Before a redemption is
processed, the shareholder will be allowed 30 days after written notice from the
Trust to make an additional investment sufficient to bring the value of shares
in the account to $1,000 ($500 for an IRA).
48
<PAGE> 52
THIS PAGE LEFT BLANK INTENTIONALLY
49
<PAGE> 53
THIS PAGE LEFT BLANK INTENTIONALLY
50
<PAGE> 54
INVESTMENT ADVISER
R. Meeder & Associates, Inc.
ADDRESS OF FUND & ADVISER
6000 Memorial Drive
Dublin, OH 43017
800-325-FLEX
614-766-7000 (in Central Ohio)
SUBADVISER-UTILITIES STOCK PORTFOLIO
Miller/Howard Investments, Inc.
141 Upper Byrdcliffe Road
P.O. Box 549
Woodstock, NY 12498
CUSTODIAN
Star Bank, N.A.
Star Bank Center
425 Walnut Street
Cincinnati, OH 45202
TRANSFER AGENT & DIVIDEND
DISBURSING AGENT
Mutual Funds Service Co.
6000 Memorial Drive
Dublin, OH 43017
800-325-FLEX
614-766-7000 (in Central Ohio)
AUDITORS
KPMG Peat Marwick LLP
Two Nationwide Plaza
Columbus, OH 43215
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Highlights 3
Synopsis of Financial Information 4
Performance Information 6
Financial Highlights 8
Performance Comparisons 13
Investment Objective and Policies 17
The Growth Fund 17
The Muirfield Fund 18
The Total Return Utilities Fund 18
The U.S. Government Bond Fund 20
The Money Market Fund 21
Additional Investment Policies of The
Growth Stock, Mutual Fund, Bond,
Money Market Portfolios 22
Additional Investment Policies of The
Utilities Stock Portfolio 26
The Trust and Its Management 31
Distribution Plans 34
Income Dividends, Capital Gains and
Taxes 35
How Net Asset Value is Determined 38
Other Information 38
How to Buy Shares 41
How to Make Withdrawals (Redemptions) 42
Exchange Privilege 45
Flex-funds Retirement Plans 47
Other Shareholder Services 47
Shareholder Accounts 47
</TABLE>
THE FLEX-FUNDS
PROSPECTUS
APRIL ,1996
51
<PAGE> 55
THE FLEX-FUNDS
CROSS REFERENCE SHEET TO FORM N-1A
FOR THE MONEY MARKET FUND
Part A.
<TABLE>
<CAPTION>
Item No. Prospectus Caption
- -------- ------------------
<S> <C>
1 Cover Page
2 Highlights
Synopsis of Financial Information
3 Financial Highlights
4 The Trust and its Management
Investment Objectives and Policies
5 The Trust and its Management
5A Not applicable
6(a) Other Information - Shares of Beneficial Interest
6(b) Not applicable
6(c) Other Information - Shares of Beneficial Interest
6(d) Not applicable
6(e) Shareholder Inquiries
6(f)(g) Income Dividends and Taxes
6(h) Cover Page
Other Information - Investment Structure
7(a) Not applicable
7(b) How Net Asset Value is Determined
Money Market Fund Yield
7(c) Exchange Privilege
Flex-funds Retirement Plans
Other Shareholder Services
7(d) How to Buy Shares
7(e)(f) Distribution Plan
8(a) How to Make Withdrawals (Redemptions)
8(b) Not applicable
8(c) Shareholder Accounts
8(d) How to Make Withdrawals (Redemptions)
9 Not applicable
</TABLE>
<PAGE> 56
PROSPECTUS APRIL , 1996
THE FLEX-FUNDS
THE MONEY MARKET FUND
6000 Memorial Drive
Dublin, OH 43017
614-766-7000
THE FLEX-FUNDS ARE A FAMILY OF MUTUAL FUNDS ORGANIZED AS A BUSINESS
TRUST (THE "TRUST") CONSISTING OF FIVE SEPARATE PORTFOLIOS (THE "FUNDS"), EACH
OF WHICH HAS SEPARATE INVESTMENT OBJECTIVES AND POLICIES. THE MONEY MARKET
FUND'S OBJECTIVE IS CURRENT INCOME AND STABLE ASSET VALUES THROUGH INVESTMENT IN
A PORTFOLIO OF MONEY MARKET INSTRUMENTS. THE TRUST SEEKS TO ACHIEVE THE
INVESTMENT OBJECTIVE OF THE MONEY MARKET FUND (THE "FUND") BY INVESTING ALL OF
THE INVESTABLE ASSETS OF THE FUND IN THE MONEY MARKET PORTFOLIO (THE
"PORTFOLIO"), A CORRESPONDING OPEN-END MANAGEMENT INVESTMENT COMPANY HAVING THE
SAME INVESTMENT OBJECTIVE AS THE FUND. ACCORDINGLY, INVESTORS SHOULD CAREFULLY
CONSIDER THIS INVESTMENT APPROACH. FOR ADDITIONAL INFORMATION REGARDING THIS
UNIQUE CONCEPT, SEE "INVESTMENT OBJECTIVES AND POLICIES" ON PAGE 6 AND "OTHER
INFORMATION --SHARES OF BENEFICIAL INTEREST AND INVESTMENT STRUCTURE" ON PAGE 12
AND 13.
The Fund will seek to maintain a constant net asset value of $1 per
share, although there is no assurance it will be able to do so. Investments in
Fund shares are neither insured nor guaranteed by the U. S. Government.
There are no commissions, fees or charges for the purchase or
redemption of shares, although the Trust has adopted Rule 12b-1 distribution
plans for using as much as 2/10 of 1% of net assets annually to aid in the
distribution of shares.
This Prospectus sets forth basic information about the Trust and The
Money Market Fund that a prospective investor should know before investing and
it should be retained for future reference. A STATEMENT OF ADDITIONAL
INFORMATION, dated April , 1996, has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. The Statement of
Additional Information is available upon request and without charge by
contacting the Trust at the address given above or by calling: 1-800-325-FLEX,
or (614) 766-7000.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
INVESTMENT ADVISER: R. MEEDER & ASSOCIATES, INC.
PROSPECTUS --APRIL __, 1996
<PAGE> 57
- --------------------------------------------------------------------------------
Highlights
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE: The Money Market Fund's investment objective is current
income and stable asset values through investment in a portfolio of money market
instruments. The Trust seeks to achieve the Fund's objective by investing all of
the investable assets of the Fund in a corresponding open-end management
investment company (the "Portfolio") having the same investment objective as the
Fund. See "Investment Objective and Policies."
LIQUIDITY: The Trust is an open-end investment company. The Money Market Fund
continuously offers and redeems shares of beneficial interest at next determined
net asset value per share. See "How to Buy Shares" and "How to Make Withdrawals
(Redemptions)."
DIVERSIFICATION: The Fund is a diversified mutual fund because the assets of the
Fund's Portfolio are restricted by the following rules: (1) No more than 5% may
be invested in the securities of a single company, and (2) the Fund's Portfolio
may not purchase more than 10% of any company's outstanding voting securities.
NO SALES OR REDEMPTION CHARGES: There are no commissions, fees or charges for
the purchase or redemption of shares. See "Synopsis of Financial Information,"
"How to Buy Shares" and "How to Make Withdrawals (Redemptions)."
FREE CHECK-WRITING REDEMPTION: A supply of drafts will be supplied to any
shareholder when requested. Drafts may be written in any amount not less than
$100. Mutual Funds Service Co., the Transfer Agent for the Fund, will return
drafts drawn on funds from purchases made by check(s) for a period of fifteen
(15) calendar days after receipt of the check(s) used to purchase shares. See
"How to Make Withdrawals (Redemptions)."
RETIREMENT PLANS AND OTHER SHAREHOLDER SERVICES: The Trust offers retirement
plans, which include a prototype Profit Sharing Plan, Money Purchase Pension
Plan, Salary Savings Plan -- 401(K), Individual Retirement Account (IRA),
Simplified Employee Pension (SEP), and a number of other special shareholder
services.
MINIMUM INVESTMENT: A minimum investment of $2,500 is required to open an
account, except an IRA account, for which the minimum is $500. Subsequent
investments must be at least $100. The Trust has the right to redeem the shares
in an account and pay the proceeds to the shareholder if the value of the
account drops below $1,000 because of shareholder redemptions. The shareholder
will be given 30 days' written notice and an opportunity to restore his account
to $1,000 ($500 for an IRA). See "How to Buy Shares," "Other Shareholder
Services" and "Shareholder Accounts."
INVESTMENT ADVISER AND MANAGER: R. Meeder & Associates, Inc. is the Portfolio's
Investment Adviser and Manager (the "Investment Adviser" or the "Manager"). The
Manager has been an Investment Adviser to individuals, retirement plans,
corporations and foundations since 1974. See "The Trust and Its Management."
2
<PAGE> 58
DISTRIBUTION PLAN: The Money Market Fund has adopted a Rule 12b-1 distribution
plan for using as much as 2/10 of 1% of average net assets annually to aid in
the distribution of shares. See "Distribution Plan."
HOW TO BUY SHARES: Complete the New Account Application and forward with payment
as directed. Investments in The Money Market Fund are priced at the net asset
value next determined after an order is received by Mutual Funds Service Co.,
the Transfer Agent for the Fund, provided Star Bank, N.A., (the "Bank"), the
Custodian for the Fund, receives federal funds by 4:00 p.m. Eastern time that
same day. The Money Market Fund intends to maintain a constant net asset value
of $1.00 per share, although there is no assurance it will be able to do so. See
"How to Buy Shares" and "How Net Asset Value is Determined."
- --------------------------------------------------------------------------------
SHAREHOLDER INQUIRIES
- --------------------------------------------------------------------------------
Shareholder inquiries should be directed to the Trust by writing or
telephoning the Trust at the address or telephone number indicated on the cover
page of this Prospectus. To protect the confidentiality of shareholder accounts,
information relating to a specific account will be disclosed pursuant to a
telephone inquiry only if the shareholder identifies the account by account
number or by the social security number listed on the account.
FOR MORE INFORMATION ABOUT SPECIFIC SHAREHOLDER ISSUES, PLEASE SEE THE
SHAREHOLDER MANUAL THAT BEGINS ON PAGE 14.
- --------------------------------------------------------------------------------
SYNOPSIS OF FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE MONEY
MARKET FUND
-----------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sale Load Imposed on Purchases ..... none
Maximum Sales Load Imposed on
Reinvested Dividends .............. none
Deferred Sales Load ........................ none
Redemption Fees ............................ none
Exchange Fee ............................... none
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
Management Fees
(Net of Fees Waived*) ............. 0.15%
Distribution Plan
(12b-1 Fees)** .................... 0.08%
Other Expenses ............................. 0.17%
</TABLE>
3
<PAGE> 59
<TABLE>
<CAPTION>
THE MONEY
MARKET FUND
-----------
<S> <C>
TOTAL FUND OPERATING EXPENSES*
(After Fee Waiver)................. 0.40%
</TABLE>
EXAMPLE
An investor would pay the following expense on a $1,000 investment,
assuming (1) a 5% annual return and (2) redemption at the end of each time
period.
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
The Money Market Fund--Net of Fees
Waived* $4 $13 $22 $51
</TABLE>
*Expenses used in these illustrations are based upon expenses actually
incurred for both The Money Market Fund and its proportionate share of expenses
from its corresponding Portfolio, the Money Market Portfolio, for the year ended
December 31, 1995. During the year, the Trust's Investment Adviser reimbursed a
portion of Fund expenses and waived a portion of its management fees in order to
reduce the operating expenses of The Money Market Fund. Management fees shown as
"Net of Fees Waived" are based on actual fees paid by the Fund. Had the fee not
been waived, Total Fund Operating Expenses, as a percentage of average net
assets, would have been 0.64%.
The Investment Adviser presently intends to waive a portion of its
management fees in the Money Market Portfolio to the extent necessary to achieve
an effective yield for The Money Market Fund that will rank within the top 10%
of yields for all general purpose money market funds in 1996. There is no
guarantee that waiver of fees alone will accomplish this objective. The
Investment Adviser may change this policy at any time without notice to
shareholders. This would, in some circumstances, have a material adverse effect
on the net income of the Fund, and the yield earned by shareholders. For
planning purposes, prospective investors and shareholders should assume that
expenses will be based on the maximum fee.
**Distribution Plan Expense: The Fund is party to agreements whereby
consultant companies or individuals (including two Trustees of the Portfolio),
are paid for explaining the Fund, its investment objectives and policies, and
the Trust's retirement plans, to clients. Other distribution plan expense
includes: the expense of printing and mailing prospectuses, periodic reports and
other sales materials to prospective investors; advertising; payment for
marketing programs and the services of public relations consultants; and the
cost of special telephone service to encourage the sale of Trust shares. (See
"Distribution Plan.")
The table on this page is meant to assist an investor in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly. The Trust does not impose a sales charge, exchange fee or
redemption fee with the following exceptions. The custodian of IRA accounts
charges a $5.00 annual maintenance fee and the transfer agent charges IRA
accounts a $7.00 fee if the account is totally liquidated. For more complete
descriptions of the various costs and expenses of the Trust see "The Trust and
Its Management," and "Distribution Plan."
4
<PAGE> 60
The Board of Trustees of the Fund believes that the aggregate per share
expenses of the Fund and the Portfolio will be less than or approximately equal
to the expenses which the Fund would incur if it retained the services of an
investment adviser and the assets of the Fund were invested directly in the type
of securities being held by the Portfolio. For additional information concerning
expenses incurred by the Fund and the Portfolio, see "The Trust and Its
Management" herein, and "Investment Adviser and Manager" in the Statement of
Additional Information.
The table and hypothetical example above are for illustrative purposes
only. The investment rate of return and expenses should not be considered as
representations of past or future performance as actual rates of return and
expenses may be more or less than the rate and amounts shown.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights for The Money Market Fund are listed below.
This information has been audited in conjunction with the annual audits of the
financial statements of The Flex-funds and their corresponding Portfolios by
KPMG Peat Marwick LLP, independent certified public accountants, for each of
the periods ended December 31, 1988 through December 31, 1995 and by other
independent certified public accountants for the earlier periods.
<TABLE>
<CAPTION>
THE MONEY MARKET FUND
------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment income 0.06 0.04 0.03 0.04 0.06
Net Gains or (Losses) on Securities
(both realized and unrealized) - - - - -
- -----------------------------------------------------------------------------------------------------------
Total From Investment Operations 0.06 0.04 0.03 0.04 0.06
- -----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends (from net investment income) (0.06) (0.04) (0.03) (0.04) (0.06)
Distributions (from capital gains) - - - - -
- -----------------------------------------------------------------------------------------------------------
Total Distributions (0.06) (0.04) (0.03) (0.04) (0.06)
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------------------------------------------
Total Return 5.85% 4.10% 2.98% 3.70% 6.12%
- -----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period ($000) 141,087 164,838 200,030 245,259 316,951
Ratio of Expenses to Average Net Assets 0.40% 0.37% 0.37% 0.35% 0.38%
Ratio of Net Investment Income to Average
Net Assets 5.70% 4.02% 2.94% 3.68% 5.96%
Ratio of Expenses to Average Net Assets
before waiver of fees and reimbursement
of expenses(1) 0.64% 0.57% 0.57% 0.56% 0.56%
Ratio of Net Investment Income to Average Net
Assets before waiver of fees and
reimbursement of expenses(1) 5.46% 3.82% 2.74% 3.47% 5.78%
<CAPTION>
THE MONEY MARKET FUND
------------------------------------------------------------
1990 1989 1988 1987 1986
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment income 0.08 0.09 0.07 0.06 0.07
Net Gains or (Losses) on Securities
(both realized and unrealized) - - - - -
- -----------------------------------------------------------------------------------------------------------
Total From Investment Operations 0.08 0.09 0.07 0.06 0.07
- -----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends (from net investment income) (0.08) (0.09) (0.07) (0.06) (0.07)
Distributions (from capital gains) - - - - -
- -----------------------------------------------------------------------------------------------------------
Total Distributions (0.08) (0.09) (0.07) (0.06) (0.07)
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------------------------------------------
Total Return 8.21% 9.32% 7.59% 6.62% 6.75%
- -----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period ($000) 247,481 264,078 217,183 145,376 170,537
Ratio of Expenses to Average Net Assets 0.38% 0.39% 0.35% 0.41% 0.31%
Ratio of Net Investment Income to
Average Net Assets 7.92% 8.94% 7.50% 6.65% 6.25%
Ratio of Expenses to Average Net Assets
before waiver of fees and
reimbursement of expenses(1) 0.55% 0.59% 0.60% 0.66% 0.56%
Ratio of Net Investment Income to Average Net
Assets before waiver of fees and
reimbursement of expenses(1) 7.75% 8.74% 7.25% 6.40% 6.00%
</TABLE>
(1) See "Synopsis of Financial Information" for explanation of adviser's waiver
of fees and reimbursement of expenses.
Financial Statements and Notes pertaining thereto appear in the Statement of
Additional Information Dated April , 1996.
5
<PAGE> 61
The Money Market Fund advertises performance data, and this is limited
to yield quotations. The method by which these yield quotations are computed is
set forth in the Trust's Statement of Additional Information.
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
- --------------------------------------------------------------------------------
The Money Market Fund and the Money Market Portfolio have their own
separate investment objectives and policies, as set forth below. These
investment objectives and policies, which are identical, are not fundamental and
may be changed by their respective Trustees without approval of the Fund's
shareholders, or approval of the Portfolio's investors. No such change would be
made in the Fund, or Portfolio, without 30 days written notice to shareholders.
The Trust seeks to achieve the Fund's investment objective by investing all of
its investable assets in the Portfolio. For more information concerning the
investment structure of the Fund which invests its assets in a corresponding
Portfolio, see "Other Information--Investment Structure."
Since the investment characteristics of the Fund will correspond
directly to those of the Portfolio, the following is a discussion of the various
investments of and techniques employed by the Portfolio. Additional information
about the investment policies of the Portfolio appears in the Statement of
Additional Information. There can be no assurance that the investment objectives
of the Fund and the Portfolio will be achieved.
The investment objective of the Portfolio is current income and stable
asset values through investment in money market instruments. The Portfolio will
seek to maintain a constant net asset value of $1 per share, although there is
no assurance it will be able to do so. The Portfolio will seek to achieve its
objective by investing in a portfolio of high-quality money market instruments
which mature in 397 days or less. Further, the Portfolio will seek to minimize
changes in the value of its assets caused by market factors by maintaining a
dollar-weighted average portfolio maturity of 90 days or less.
The Portfolio will value its securities by the amortized cost method
and will normally include any accrued discount or premium in its daily dividend
and thereby keep constant the value of its assets and its net asset value per
share. This method does not take into account unrealized capital gains or
losses.
Further, the Portfolio may change its average portfolio maturity or
level of quality to protect its and the Fund's net asset value when it is
perceived that changes in the liquidity of major financial institutions may
adversely affect the money markets. Consequently, for temporary defensive
purposes, the Portfolio may shorten the average maturity of its investments
and/or invest only in the highest quality debt instruments, including, for
example, U.S. Government or Agency obligations.
The Portfolio will invest exclusively in money market instruments which
are deemed eligible securities pursuant to rules under the Investment Company
Act applying to money market funds. At least 95% of the Portfolio's assets will
be invested in securities defined by the rules as "first-tier" securities.
First-tier securities must have two quality rating which are in the highest
rating
6
<PAGE> 62
category, or one if rated by only one organization. Second-tier securities must
have ratings in the highest two rating categories and will be limited to a
maximum of five percent of assets with each position limited to the greater of
$1,000,000 or 1% of assets. The Portfolio also intends to comply with all other
quality and credit quality monitoring criteria applying to money market funds.
The Portfolio will limit its purchases to U.S. Government Securities and
Securities of its Agencies and instrumentalities, Bank Obligations and
instruments secured thereby, high quality Commercial Paper, high grade corporate
obligations and repurchase agreements. Information concerning specific quality
criteria is set forth in the Trust's Statement of Additional Information.
RISK FACTORS
The Investment Adviser exercises due care in the selection of the
Portfolio's money market instruments. However, there is a risk that the issuers
of the securities may not be able to meet their obligations to pay interest or
principal when due. There is also a risk that some of the Portfolio's securities
might have to be liquidated prior to maturity at a price less than original
amortized cost value, face amount, or maturity value, to meet larger than
expected redemptions. Any of these risks, if encountered, could cause a
reduction in net income or in the net asset value of the Fund's shares.
The Portfolio may invest in repurchase agreements with banks and
securities brokers. All repurchase agreements entered into by the Portfolio will
be fully collateralized. The Portfolio's risk is that the seller may fail to
repurchase the security on the delivery date. If the seller defaults, the
underlying security constitutes collateral for the seller's obligation to pay.
It is a policy of the Portfolio to make settlement on repurchase agreements only
upon proper delivery of the underlying collateral. In the event of a bankruptcy
or other default of a seller or a repurchase agreement to the Portfolio, the
Portfolio could encounter delays and expenses in enforcing its rights and could
experience losses, including a decline in the value of the underlying securities
and loss of income. Repurchase agreements usually are for short periods, such as
one week or less, but could be longer.
The Portfolio may invest in private placement commercial paper. Private
placement commercial paper ("Rule 144A securities") consists of unregistered
securities which are traded in public markets to qualified institutional
investors, such as the Portfolio. A Portfolio's risk is that the universe of
potential buyers for the securities, should the Portfolio desire to liquidate a
position, is limited to qualified dealers and institutions, and therefore such
securities could have the effect of being illiquid.
- --------------------------------------------------------------------------------
THE TRUST AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
The Trust is a diversified, open-end management investment company
organized as a Massachusetts Business Trust on December 31, 1991 as the
successor to a Pennsylvania Business Trust organized on April 30, 1982. The
Trust's offices are at 6000 Memorial Drive, Dublin, OH 43017. The business and
affairs of the Trust are under the direction of its Board of Trustees.
7
<PAGE> 63
Neither the Trust nor the Fund has an investment adviser because the
Trust seeks to achieve the investment objective of the Fund by investing its
assets in the Portfolio. The Portfolio has retained the services of R. Meeder &
Associates, Inc. as investment adviser.
R. Meeder & Associates, Inc. (the "Manager"), has been an investment
adviser to individuals and retirement plans since 1974. The Manager served as
the Trust's investment adviser from its inception in 1982 until May of 1992, at
which time the investment by the Fund in the Portfolio was implemented. The
Manager serves the Portfolio pursuant to an Investment Advisory Contract under
the terms of which it has agreed to provide an investment program within the
limitations of the Portfolio's investment policies and restrictions, and to
furnish all executive, administrative, and clerical services required for the
transaction of Portfolio business, other than accounting services and services
which are provided by the Portfolio's custodian, transfer agent, independent
accountants and legal counsel.
The Manager was incorporated in Ohio in 1974 and maintains its
principal offices at 6000 Memorial Drive, Dublin, OH 43017. The Manager is a
wholly-owned subsidiary of Muirfield Investors, Inc. ("MII"). MII is controlled
by Robert S. Meeder, Sr. through ownership of voting common stock. MII conducts
business only through its five subsidiaries which are the Manager; Mutual Funds
Service Co., the Trust's transfer agent; Opportunities Management Co., a venture
capital investor; Meeder Advisory Services, Inc., a registered investment
adviser and OMCO, Inc., a registered commodity trading adviser and commodity
pool operator.
The Manager's officers and directors, their principal offices are as
follows: Robert S. Meeder, Sr., Chairman and Sole Director; Robert S. Meeder,
Jr., President; G. Robert Kincheloe, Senior Vice President; Philip A. Voelker,
Senior Vice President; Donald F. Meeder, Vice President and Secretary; Sherrie
L. Acock, Vice President; Robert D. Baker, Vice President, Wesley F. Hoag,
General Counsel and Chief Operating Officer; and Steven T. McCabe, Vice
President.
Philip A. Voelker, is the portfolio manager primarily responsible for
the day-to-day management of the Money Market Portfolio. Mr. Voelker is Vice
President and Trustee of the Money Market Portfolio, Vice President of The
Flex-funds and Senior Vice President of the Manager. Mr. Voelker has been
associated with the Manager since 1975 and has managed the Portfolio since 1985.
The Manager earns an annual fee, payable in monthly installments, for
the Portfolio at the rate of 0.40% of the first $100 million and 0.25% in excess
of $100 million, of average net assets.
The Investment Adviser presently intends to waive a portion of its
management fee in the Portfolio, and may change this policy at any time without
notice to shareholders. For planning purposes prospective investors and
shareholders should assume that expenses will be based on the maximum fee. (See
footnotes to "Synopsis of Financial Information.")
Accounting, stock transfer, dividend disbursing, and shareholder
services are provided to the Portfolio and the Fund by Mutual Funds Service Co.,
6000 Memorial Drive, Dublin, Ohio 43017, a wholly-owned subsidiary of MII. The
minimum annual fee, payable monthly, for accounting services in the Portfolio is
$30,000. Subject to the applicable minimum fee, the fee is computed
8
<PAGE> 64
at the rate of 0.15% of the first $10 million, 0.10% of the next $20 million,
0.02% of the next $50 million and 0.01% in excess of $80 million of the
Portfolio's average net assets. In addition, the Fund incurs (subject to a
$4,000 annual minimum fee) an annual fee of the greater of $20 per shareholder
account or 0.06% of the Fund's average net assets, payable monthly, for stock
transfer, dividend disbursing and shareholder support services. Mutual Funds
Service Co. also serves as Administrator to the Fund pursuant to an
Administration Services Agreement which was effective February 1, 1995. Services
provided to the Fund include coordinating and monitoring any third party
services to the Fund; providing the necessary personnel to perform
administrative functions for the Fund; assisting in the preparation, filing and
distribution of proxy materials, periodic reports to Trustees and shareholders,
registration statements and other necessary documents. The Fund incurs an annual
fee, payable monthly, of .03% of the Fund's average net assets. These fees are
reviewable annually by the respective Trustees of the Trust and the Portfolio.
For the year ended December 31, 1995, total payments to Mutual Funds Service Co.
amounted to $194,718 for the Fund and Portfolio collectively.
Pursuant to a Subadministrative Services Agreement with Mutual Funds
Service Co., Signature Broker-Dealer Services, Inc. ("Signature"), as
Subadministrator, is responsible for conducting certain day-to-day
administration of the Funds subject to the supervision and direction of Mutual
Funds Service Co.
Information concerning the Trustees and officers of both the Trust and
the Portfolio appears in the Statement of Additional Information.
- --------------------------------------------------------------------------------
DISTRIBUTION PLAN
- --------------------------------------------------------------------------------
The Trust has adopted a distribution expense plan (the "Plan") which
authorizes The Money Market Fund to bear a portion of the expense of any
activity which is primarily intended to result in the sale of Fund shares. This
Plan permits, among other things, payment for distribution in the form of
commissions and fees, advertising, the services of public relations consultants,
and direct solicitation. Possible recipients include securities brokers,
attorneys, accountants, investment advisers, investment performance consultants,
pension actuaries, banks, and service organizations, all of them being hereafter
referred to as "Consultants."
The Trust may expend in the Fund as much as, but not more than, 2/10 of
1% of its average net assets annually pursuant to the Plan. The Fund does not
make Plan payments with respect to any of the other Funds of the Trust, nor are
any of its Plan payments made by any of the other Funds.
The Plan was approved by the Board of Trustees, who made a
determination that there is a reasonable likelihood that the Plan will benefit
the Trust.
The Trust has entered into agreements whereby Consultants (including
two Trustees of the Portfolio) are paid for their assistance in explaining and
interpreting the Trust, its investment objectives and policies, and its
retirement plans to their clients. Under these agreements, Consultants are paid
quarterly compensation by the Trust on the average value of Money Market Fund
shares held by their clients. Although the compensation is thus seen to be
continuing, the
9
<PAGE> 65
Trust retains the right to terminate any Consultant's agreement on 60 days'
notice, without further obligation beyond the date of termination.
Although the objective of the Trust is to pay Consultants for a portion
of the expenses they incur and to provide them with some incentive to be of
assistance to the Trust and its shareholders, no effort has been made to
determine the actual expenses incurred by Consultants. If any Consultant's
expenses are in excess of what the Trust pays, such excess will not be paid by
the Trust. Conversely, if the Consultant's expenses are less than what the Trust
pays, the Consultant is not obligated to refund the excess, and this excess
could represent a profit for the Consultant.
Total payments made in The Money Market Fund under the Distribution
Plan for the period ended December 31, 1995, as a percentage of average net
assets, amounted to 0.08%. (See "Synopsis of Financial Information.")
- --------------------------------------------------------------------------------
INCOME DIVIDENDS AND TAXES
- --------------------------------------------------------------------------------
It is the policy of the Trust to distribute substantially all of its
net income, which for the Fund consists of the income it earns from its
investment in the Portfolio, less expenses. The Fund's net income is calculated
daily and declared as a dividend to shareholders of record at the close of the
previous business day, and to the holders of shares purchased that same day
prior to 3:00 p.m., with one exception. If a shareholder requests a redemption
and the request is received by 3:00 p.m., then the shares so redeemed that day
will not be paid that day's dividend. Net income earned by The Money Market Fund
on a weekend or a holiday is declared as a dividend on Friday or the day prior
to the holiday. All such dividends of net income are automatically reinvested in
additional shares of the Fund at the net asset value on the last business day of
each month. A shareholder may elect to receive dividends in cash either by
checking the appropriate box on the New Account Application, or by notifying the
Fund in writing. If the entire account of a shareholder is withdrawn, all
dividends accrued at the time of withdrawal will be paid at that time.
The Internal Revenue Code of 1986 imposes on the Trust a nondeductible
excise tax unless the Trust distributes annually at least 98% of its net
investment income earned during the calendar year, at least 98% of capital gain
net income realized in the 12 months preceding October 31, and any undistributed
balances from the previous year. In addition, the Tax Reform Act of 1986
provides that any dividend declared by a Fund in October, November, or December
and paid in January will be deemed to have been paid by the Fund and to have
been received by each shareholder in December.
Dividends and capital gains distributions will be taxable to the
shareholder as income in the year distributed, whether received in cash or
reinvested in additional shares. Shareholders not otherwise subject to tax on
their income will not be required to pay tax on amounts distributed to them.
Each shareholder will receive a statement annually informing him of the amount
of the income and capital gains which have been distributed to him during the
calendar year. The Trust files federal income tax returns for each of the Funds.
Each Fund is treated as a separate entity for federal income tax purposes.
10
<PAGE> 66
The Trust qualified as a "regulated investment company" for each of the
last thirteen fiscal years.
The foregoing discussion of taxes is limited to federal income taxes.
Distributions, whether in cash or in kind, may be subject to state and local
taxes. Shareholders are urged to consult their tax advisers regarding specific
questions relating to federal, state and local taxes.
The Trust is required to withhold and remit to the federal government
31% of any reportable payments (which may include dividends, capital gains
distributions, if any, and redemptions) paid to certain shareholders. In order
to avoid this withholding requirement, each shareholder must certify on the New
Account Application that the social security or taxpayer identification number
is correct and that the shareholder is not currently subject to backup
withholding or is exempt from backup withholding.
- --------------------------------------------------------------------------------
HOW NET ASSET VALUE IS DETERMINED
- --------------------------------------------------------------------------------
Net asset value per share (the price at which shares are purchased and
redeemed) is determined each day the Trust is open for business. The Fund's
shares will not be priced on Good Friday or on any holiday observed by the
Federal Reserve system. These presently include New Year's Day, Martin Luther
King Day, President's Day, Memorial Day, Independence Day, Columbus Day,
Veterans Day, Thanksgiving Day and Christmas Day. Net asset value is obtained by
dividing the value of the Fund's assets (i.e., the value of its investment in
the Portfolio and other assets), less liabilities, by the total number of its
shares of beneficial interest outstanding at the time. The assets of the
Portfolio are valued on the basis of amortized cost method, which involves
valuing a portfolio instrument at its cost initially and, thereafter, assuming a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the instrument. The
Fund will seek to maintain a constant net value of $1.00 per share.
- --------------------------------------------------------------------------------
MONEY MARKET FUND YIELD
- --------------------------------------------------------------------------------
The Money Market Fund will advertise its yield and effective yield. The
simple annualized yield represents the net income for a seven-day period,
expressed on an annualized basis. The effective yield will be higher than the
yield because of the compounding effect of the assumed reinvestment of dividends
over a period of one year. Both yield figures are based upon historical earnings
and are not intended to indicate future performance. Yields will fluctuate daily
as net income fluctuates. The method by which the Fund computes its yield is
described in the Statement of Additional Information. For current yield
information call 1-800-325-FLEX, or in central Ohio (614) 766-7000.
Comparative performance information may be used from time to time in
advertising or marketing information relative to the Fund, including data from
Lipper Analytical Services, Inc., IBC/Donoghue Money Fund Report and other
publications.
11
<PAGE> 67
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
SHARES OF BENEFICIAL INTEREST
The Trust's Declaration of Trust permits the Trust to offer and sell an
unlimited number of full and fractional shares of beneficial interest with a par
value of $.10 per share. Shares are fully paid, nonassessable and fully
transferable when issued. All shares are issued as full or fractional shares.
A fraction of a share has the same rights and privileges as a full
share. Each Fund of the Trust will issue its own series of shares of beneficial
interest. The shares of each Fund represent an interest only in that Fund's
assets (and profits or losses) and in the event of liquidation, each share of a
particular Fund would have the same rights to dividends and assets as every
other share of that Fund.
Each full or fractional share has a proportionate vote. On some issues,
such as the election of Trustees, all shares of the Trust vote together as one
series. On an issue affecting a particular Fund, only its shares vote as a
separate series. An example of such an issue would be a fundamental investment
restriction pertaining to only one Fund. In voting on a Distribution Plan,
approval of the Plan by the shareholders of a particular Fund would make the
Plan effective as to that Fund, whether or not it had been approved by the
shareholders of the other Funds.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
When matters are submitted for shareholder vote, shareholders of each
Fund will have one vote for each full share held and proportionate, fractional
votes for fractional shares held. A separate vote of a Fund is required on any
matter affecting the Fund on which shareholders are entitled to vote.
Shareholders of one Fund are not entitled to vote on a matter that does not
affect that Fund but that does require a separate vote of any other Fund. There
normally will be no meetings of shareholders for the purpose of electing
Trustees unless and until such time as less than a majority of Trustees holding
office have been elected by shareholders, at which time the Trustees then in
office will call a shareholders' meeting for the election of Trustees. Any
Trustee may be removed from office upon the vote of shareholders holding at
least two-thirds of the Trust's outstanding shares at a meeting called for that
purpose. The Trustees are required to call such a meeting upon the written
request of shareholders holding at least 10% of the Trust's outstanding shares.
Shareholders have under certain circumstances (e.g., upon application and
submission of certain specified documents to the Trustees of a Fund by a
specified number of shareholders) the right to communicate with other
shareholders in connection with requesting a meeting of shareholders for the
purpose of removing one or more Trustees.
12
<PAGE> 68
Each Portfolio, in which all the assets of a corresponding Fund will be
invested, is organized as a trust under the laws of the State of New York. Each
Portfolio's Declaration of Trust provides that a Fund and other entities
investing in that Portfolio (e.g., other investment companies, insurance company
separate accounts, and common and commingled trust funds) will each be liable
for all obligations of that Portfolio. However, the risk of a Fund incurring
financial loss on account of such liability is limited to circumstances in which
both inadequate insurance existed and that Portfolio itself was unable to meet
its obligations. Accordingly, the Trustees of the Trust believe that neither a
Fund nor its shareholders will be adversely affected by reason of a Fund's
investing in the corresponding Portfolio. In addition, whenever the Trust is
requested to vote on matters pertaining to the fundamental policies of a
Portfolio, the Trust will hold a meeting of the corresponding Fund's
shareholders and will cast its vote as instructed by the Fund's shareholders.
INVESTMENT STRUCTURE
Unlike other mutual funds which directly acquire and manage their own
portfolio of securities, the Fund seeks to achieve its investment objectives by
investing all of its assets in a corresponding Portfolio, a separate registered
investment company with the same investment objectives as the Fund. Therefore,
an investor's interest in the Portfolio's securities is indirect. In addition to
selling a beneficial interest to the Fund, the Portfolio may sell beneficial
interests to other mutual funds or institutional investors. Such investors will
invest in the Portfolio on the same terms and conditions and will pay a
proportionate share of the Portfolio's expenses. However, the other investors
investing in the Portfolio are not required to sell their shares at the same
public offering price as the Fund. Investors in the Fund should be aware that
these differences may result in differences in returns experienced by investors
in the different funds that invest in the Portfolio. Such differences in returns
are also present in other mutual fund structures. Information concerning other
holders of interests in the Portfolio is available by contacting the Trust by
calling: 1-800-325-FLEX, or (614) 766-7000.
Smaller funds investing in the Portfolio may be materially affected by
the actions of larger funds investing in the Portfolio. For example, if a large
fund withdraws from the Portfolio, the remaining funds may experience higher pro
rata operating expenses, thereby producing lower returns. Additionally, the
Portfolio may become less diverse, resulting in increased portfolio risk.
(However, this possibility also exists for traditionally structured funds which
have large or institutional investors.) Also, funds with a greater pro rata
ownership in the Portfolio could have effective voting control of the operations
of the Portfolio. Whenever the Trust is requested to vote on matters pertaining
to the Portfolio, the Trust will hold a meeting of shareholders of the Fund and
will cast all of its votes in the same proportion as do the Fund's shareholders.
Certain changes in the Portfolio's investment objectives, policies or
restrictions may require the Trust to withdraw the Fund's interest in the
Portfolio. Any such withdrawal could result in a distribution in kind of
portfolio securities (as opposed to a cash distribution from the Portfolio). If
such securities are distributed, the Fund could incur brokerage, tax or other
charges in converting the securities to cash. In addition, the distribution in
kind may result in a less diversified portfolio of investments or adversely
affect the liquidity of the Fund.
The Fund may withdraw the investment of any Fund from its corresponding
Portfolio at any time, if the Board of Trustees of the Trust determines that it
is in the best interests of the Fund to do so. Upon any such withdrawal, the
Board of Trustees would consider what action might be
13
<PAGE> 69
taken, including the investment of all the assets of the Fund in another pooled
investment entity having the same investment objectives as that Fund or the
retaining of an investment adviser to manage the Fund's assets in accordance
with the investment policies with respect to that Fund's corresponding
Portfolio. The inability to find an adequate investment pool or investment
adviser could have a significant impact on shareholders' investment in the Fund.
As stated in "Investment Objectives and Policies," the Fund's
investment objectives and policies are not fundamental and may be changed by
Trustees without shareholder approval. (No such change would be made, however,
without 30 days' written notice to shareholders.)
For descriptions of the investment objectives and policies of the
Portfolio, see "Investment Objectives and Policies" and "Additional Investment
Policies." For descriptions of the management and expenses of the Portfolio, see
"The Trust and Its Management" herein, and "Investment Adviser and Manager" and
"Officers and Trustees" in the Statement of Additional Information.
- --------------------------------------------------------------------------------
HOW TO BUY SHARES
- --------------------------------------------------------------------------------
Shares are offered continuously and sold without a direct sales charge,
although the Trust does pay some consultants for services in explaining the
Funds, their investment policies and restrictions, and retirement plans to their
clients. (See "Distribution Plan" and "Synopsis of Financial Information".)
Shares of The Money Market Fund are sold at the net asset value per share next
determined after receipt of both a purchase order and payment in federal funds.
The Money Market Fund intends to maintain a constant net asset value of $1.00
per share. (See "How Net Asset Value Is Determined.")
MINIMUM INVESTMENT -- The minimum investment to open an account is
$2,500 except an Individual Retirement Account (IRA) which has a $500 minimum.
Subsequent investments in any account may be made in amounts of at least $100.
OPENING AN ACCOUNT --You may open an account by mail or bank wire as
follows:
By Mail: To purchase shares, fill out the New Account Application
accompanying this Prospectus. A check payable to The Money Market Fund must
accompany the New Account Application and should be mailed to the following
address:
THE FLEX-FUNDS, C/O R. MEEDER & ASSOCIATES, INC., P.O. BOX 7177, DUBLIN,
OHIO 43017
By Bank Wire: If the wire order is for a new account in the Trust, you must
telephone the Fund prior to making your initial investment. Call
1-800-325-FLEX, or (614) 766-7000. Advise the Fund of the amount you wish
to invest and obtain an account number and instructions. Have your bank
wire federal funds to:
STAR BANK, N.A. CINTI/TRUST
(ABA #: 042-00001-3)
14
<PAGE> 70
ATTENTION: THE FLEX-FUNDS
MONEY MARKET FUND
Credit Account Number (account number for Fund as follows):
Money Market Fund--
Account Number 930-5533
Account Name (your name)
Personal Account No. (your Money Market Fund account number)
On new accounts, a completed application must be sent to The Flex-funds
c/o R. Meeder & Associates, Inc., P.O. Box 7177, Dublin, OH 43017 on the same
day your wire is sent. The Trust will not permit redemptions until it receives
the New Account Application in good order.
SUBSEQUENT INVESTMENTS--Subsequent investments in an existing account
in the Fund may be made by mailing a check payable to The Money Market Fund
(please include your account number on the check) and mail as follows:
THE FLEX-FUNDS
LOCATION NUMBER: 00215
CINCINNATI, OH 45264-0215
Subsequent investments may also be made by bank wire as described
above. It is necessary to notify the Fund prior to each wire purchase. Wires
sent without notifying the Fund prior to 3:00 p.m. Eastern time will result in a
delay of the effective date of your purchase.
AUTOMATIC ACCOUNT BUILDER--Periodic investments in an existing account
can be made by selecting this option. (See "Other Shareholder Services.")
WHEN PURCHASES ARE EFFECTIVE--An Initial Wire Purchase and subsequent
wire purchase orders for The Money Market Fund which are received prior to 3:00
p.m., Eastern time on a business day, earn dividends for that entire day,
provided payment in federal funds (bank wire) is received by the bank by 4:00
p.m. Eastern time that day. Purchase orders which are received after 3:00 p.m.,
or for which payment is not received by 4:00 p.m. Eastern time, are accepted as
a purchase the following day.
Investments made by check are credited to shareholder accounts, and
begin to earn dividends, on the next business day following receipt.
If a shareholder's check is dishonored, his purchase and any dividends
paid thereon will be reversed. If shares are purchased with federal funds, they
may be redeemed at any time thereafter and the shareholder may secure his funds
as explained below. (See "How to Make Withdrawals (Redemptions).") However, if
shares are purchased by check(s) or the Automatic Account Builder, Mutual Funds
Service Co. will delay payment of redemption proceeds until the check used to
purchase shares, or Automatic Account Builder order, has cleared which could be
fifteen (15) calendar days or more subsequent to the purchase of the shares. The
Fund will forward the proceeds promptly once the check has cleared.
15
<PAGE> 71
- --------------------------------------------------------------------------------
HOW TO MAKE WITHDRAWALS (REDEMPTIONS)
- --------------------------------------------------------------------------------
Shares are redeemed and funds withdrawn at net asset value per share,
and there are no redemption fees. (See "How Net Asset Value Is Determined.")
BY MAIL--A shareholder may redeem shares by mailing a written request
in good order to The Flex-funds, c/o R. Meeder & Associates, Inc., P.O. Box
7177, Dublin, OH 43017. Good order means that the request must be signed by the
shareholder(s) and the signature(s) must be guaranteed by an eligible guarantor
institution (a bank, broker-dealer, credit union, securities exchange and
association, clearing agency and savings association). The Trust does not accept
signatures guaranteed by a notary public. Further documentation may be required
as to the authority of the person requesting redemption of shares held of record
in the name of corporations, executors, administrators, trustees, guardians or
other fiduciaries. The Trust may waive these requirements in certain instances.
Amounts withdrawn are mailed without charge to the address printed on
your account statement.
BY TELEPHONE--A shareholder may redeem by telephone: 1-800-325-FLEX, or
call (614) 766-7000. Shareholders who wish to use this procedure must so elect
on the New Account Application. Amounts withdrawn from an account by telephone
are mailed without charge to the address printed on your account statement.
As a special service, a shareholder may arrange to have amounts in
excess of $1,000 wired in federal funds to a designated commercial bank account.
To use this procedure please designate on the New Account Application a bank and
bank account number to receive the proceeds of wire withdrawals. There is no
charge for this service.
A shareholder may change the bank account designated to receive
redemptions. This may be done at any time upon written request to the Trust. The
shareholder's signature must be guaranteed. Further documentation may be
required from corporations, executors, administrators, trustees, guardians, or
other fiduciaries.
Neither the Trust nor Mutual Funds Service Co. ("MFSCo") will be
responsible for any loss, expense, or cost arising from any telephone redemption
request made according to the authorization set forth in the New Account
Application if they reasonably believe such request to be genuine and follow
reasonable procedures designed to verify the identity of the person requesting
the redemption. If MFSCo fails to follow reasonable procedures MFSCo or the
Trust may be liable for losses due to unauthorized or fraudulent transactions.
MFSCo will provide each investor seeking telephone redemption privileges with a
personalized security code which, along with other information, will be required
of the caller upon request of a telephone redemption. Other information may also
be required and calls may be recorded.
16
<PAGE> 72
WHEN REDEMPTIONS ARE EFFECTIVE--Redemptions are made at the net asset
value per share (stabilized at a $1.00 per share as a matter of policy) next
determined after receipt of a redemption request in good order. (See "How Net
Asset Value Is Determined.")
WHEN PAYMENTS ARE MADE--If a telephone request for a redemption is
received prior to 3:00 p.m., Eastern time the redemption request will be
processed that day. Requests received after 3:00 p.m., will be processed the
next business day. Amounts withdrawn by telephone are normally mailed on the
next business day following the effective date of the order for withdrawal. If
the request is for a wire redemption, funds will be wired on the same day.
Amounts withdrawn by mail are normally sent by mail within one business day
after request is received, and must be mailed within seven days with the
following exception: If shares are purchased by check, Mutual Funds Service Co.
will not pay a redemption until reasonably satisfied the check used to purchase
shares has been collected which could be fifteen (15) calendar days or more
after shares are first paid for, unless payment was made with federal funds. The
Fund will forward proceeds promptly once the check has cleared. (See "How to Buy
Shares.")
- --------------------------------------------------------------------------------
CHECK-WRITING REDEMPTION PROCEDURE
- --------------------------------------------------------------------------------
Mutual Funds Service Co., as Dividend Disbursing and Transfer Agent for
The Money Market Fund, will provide a supply of drafts to any shareholder when
requested. Drafts are mailed to the shareholder's address of record normally
within two weeks following the date of the initial investment. These drafts may
be used to draw against the shareholder's Money Market Fund account. Drafts may
be written in any amount not less than $100. To use this privilege an investor
must complete the check-writing redemption provision of the New Account
Application form and complete the signature card, or notify the Trust after
making an initial investment.
A commercial check package consisting of 300 drafts is available for a
nominal charge. Shareholders interested in a commercial check package should
contact the Trust for additional information.
When a draft is presented to the Bank for payment, the Bank (as agent
for the shareholder) will cause the Fund to redeem sufficient shares to cover
the amount of the draft. Shares continue earning dividends until the day on
which the draft is presented to the Bank for payment. Due to the delay caused by
the requirement that redemptions be priced at the next computed net asset value,
the Bank will only accept drafts for payment which are presented through normal
bank clearing channels. If shares are purchased by check, Mutual Funds Service
Co. will return drafts drawn on funds from purchases made by check(s), or any
portion thereof, until the check(s) used to purchase shares has cleared, which
may take up to fifteen (15) calendar days, or more. If you anticipate draft
redemptions soon after you purchase shares, you are advised to wire funds to
avoid the return of any draft(s). If the amount of the draft is greater than the
value of the shares held in a shareholder's account, the draft will be returned
and the shareholder's account will be charged a fee of $15. To avoid the
possibility that a draft may not be accepted due to insufficient share balances,
no shareholder should attempt to withdraw the full amount of an account or to
close out an account by using this procedure. Neither the Trust, The Money
Market Fund, Mutual Funds Service Co., nor the Bank, will be liable for any loss
or expenses associated with returned
17
<PAGE> 73
drafts. Use of this procedure will be subject to the Bank's rules and
regulations governing checking accounts.
Shareholders may request a stop payment on any draft and Mutual Funds
Service Co. will attempt to carry out your request. Mutual Funds Service Co.
cannot guarantee that such efforts will be successful. As the Bank charges the
Trust for this service, the shareholder's account will be charged a $12.50 fee
for any such request that becomes effective.
No charge, other than those specified above, will be made to a
shareholder for participation in the check-writing redemption procedure or for
the clearance of any drafts.
- --------------------------------------------------------------------------------
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
A shareholder may exchange shares of The Money Market Fund for shares
of any other Fund offered by the Trust that are available for sale in your state
at their respective net asset values.
The Flex-funds family of funds has a variety of investment objectives.
Read the prospectus for relevant information concerning the Fund that meets your
investment goals. A prospectus may be obtained from The Flex-funds, c/o R.
Meeder & Associates, Inc., P. O. Box 7177, Dublin, Ohio 43017 or by telephone:
1-800-325-FLEX, in Ohio call (614) 766-7000.
- --------------------------------------------------------------------------------
FLEX-FUNDS RETIREMENT PLANS
- --------------------------------------------------------------------------------
The Trust offers retirement plans which include a prototype Profit
Sharing Plan, a Money Purchase Pension Plan, a Salary Savings Plan - 401(K), an
Individual Retirement Account (IRA), and a Simplified Employee Pension (SEP)
Plan. Plan Adoption Agreements and other information required to establish a
Flex-funds Retirement Plan are available from The Flex-funds, c/o R. Meeder &
Associates, Inc., P.O. Box 7177, Dublin, Ohio 43017; or call 1-800-325-FLEX, or
call (614) 766-7000.
Minimum purchase requirements for retirement plan accounts are subject
to the same requirements as regular accounts, except for an IRA, which has a
reduced minimum purchase requirement. (See "How to Buy Shares.")
- --------------------------------------------------------------------------------
OTHER SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
AUTOMATIC ACCOUNT BUILDER: Regular investments in any Fund of $100 or
more will be deducted from a shareholder's checking or savings account and
invested in shares of the Fund(s) selected. A shareholder's bank must be a
member of the Automated Clearing House (ACH). Shareholders wishing to add to
their investment account must complete the Automatic Account Builder section of
the New Account Application. There is no charge for this service.
SYSTEMATIC WITHDRAWAL PROGRAM: A Systematic Withdrawal Program is
offered for any investor who wishes to receive regular distributions from his
account. The investor must either own or purchase shares having a value of at
least $10,000 and advise the Trust in writing of the
18
<PAGE> 74
amount to be distributed and the desired frequency, i.e., monthly, quarterly or
annually. This option may be exercised by completing the appropriate section of
the New Account Application. The investor should realize that if withdrawals
exceed income dividends, the invested principal may be depleted. The investor
may make additional investments and may change or stop the program at any time.
There is no charge for this program.
SUB-ACCOUNTING FOR INSTITUTIONAL INVESTORS: The Trust's optional
sub-accounting system offers a separate shareholder account for each participant
and a master account record for the institution. Share activity is thus recorded
and statements prepared for both individual sub-accounts and for the master
account. For more complete information concerning this program contact the
Trust.
DISTRIBUTOR: Shares of the Funds are sold by the Trust itself in those
states where its shares have been registered for sale or a valid exemption
exists. States where registration or an exemption exists can be obtained by
calling 1-800-325-FLEX or (614) 766-7000.
- --------------------------------------------------------------------------------
SHAREHOLDER ACCOUNTS
- --------------------------------------------------------------------------------
The Trust maintains an account for each shareholder in full and
fractional shares. The Trust reserves the right to reject any purchase order,
and to waive minimum purchase requirements.
CONFIRMATION STATEMENTS--You will receive a statement of your account
confirming your initial purchase of shares. Thereafter, you will receive a
monthly confirmation statement which contains a summary of transactions for the
month as well as dividend reinvestment information. Monthly statements are
mailed promptly after the last business day of the month. A shareholder may
elect to receive a confirmation statement after each transaction by notifying
the Trust.
ACCOUNTS BELOW MINIMUMS--The Trust reserves the right to redeem shares
in any account for their then current net asset value and pay the proceeds to
the shareholder if at any time the account has shares valued at less than $1,000
as a result of redemptions by the shareholder. The Trust also reserves the right
to redeem the shares in any account which may have been opened under a waiver of
minimum purchase requirements if sufficient additional shares were not
subsequently purchased to meet these requirements. Before a redemption is
processed, the shareholder will be allowed 30 days after written notice from the
Trust to make an additional investment sufficient to bring the value of shares
in the account to $1,000 ($500 for an IRA).
19
<PAGE> 75
INVESTMENT ADVISER
R. Meeder & Associates, Inc.
ADDRESS OF FUND & ADVISER
6000 Memorial Drive
Dublin, OH 43017
800-325-FLEX
614-766-7000 (in Central Ohio)
CUSTODIAN
Star Bank, N.A.
Star Bank Center
425 Walnut Street
Cincinnati, OH 45202
TRANSFER AGENT & DIVIDEND
DISBURSING AGENT
Mutual Funds Service Co.
6000 Memorial Drive
Dublin, OH 43017
800-325-FLEX
614-766-7000 (in Central Ohio)
AUDITORS
KPMG Peat Marwick LLP
Two Nationwide Plaza
Columbus, OH 43215
TABLE OF CONTENTS
Page
Highlights..............................2
Shareholder Inquiries...................3
Synopsis of Financial Information.......3
Financial Highlights....................5
Investment Objective and Policies.......6
The Trust and Its Management............7
Distribution Plan.......................9
Income Dividends and Taxes.............10
How Net Asset Value is Determined......11
Money Market Fund Yield................11
Other Information......................12
How to Buy Shares......................14
How to Make Withdrawals (Redemptions)..16
Check-writing Redemption Procedure.....17
Exchange Privilege.....................18
Flex-funds Retirement Plans............18
Other Shareholder Services.............18
Shareholder Accounts...................19
THE FLEX-FUNDS
THE MONEY MARKET
FUND
PROSPECTUS
APRIL ,1996
<PAGE> 76
THE FLEX-FUNDS
CROSS REFERENCE SHEET TO FORM N-1A
FOR THE MUIRFIELD FUND
Part A.
Item No. Prospectus Caption
-------- ------------------
1 Cover Page
2 Highlights
Synopsis of Financial Information
3 Financial Highlights
4 The Trust and its Management
Investment Objectives and Policies
Additional Investment Policies
5 The Trust and its Management
5A Performance Comparison
6(a) Other Information - Shares of Beneficial Interest
6(b) Not applicable
6(c) Other Information - Shares of Beneficial Interest
6(d) Not applicable
6(e) Highlights - Shareholder Inquiries
6(f)(g) Income Dividends and Taxes
6(h) Cover Page
Other Information - Investment Structure
7(a) Not applicable
7(b) How Net Asset Value is Determined
7(c) Exchange Privilege
Flex-funds Retirement Plans
Other Shareholder Services
7(d) How to Buy Shares
7(e)(f) Distribution Plan
8(a) How to Make Withdrawals (Redemptions)
8(b) Not applicable
8(c) Shareholder Accounts
8(d) How to Make Withdrawals (Redemptions)
9 Not applicable
<PAGE> 77
PROSPECTUS APRIL __, 1996
THE FLEX-FUNDS
THE MUIRFIELD FUND
6000 Memorial Drive
Dublin, OH 43017
614-766-7000
THE FLEX-FUNDS ARE A FAMILY OF MUTUAL FUNDS ORGANIZED AS A BUSINESS
TRUST (THE "TRUST") CONSISTING OF FIVE SEPARATE PORTFOLIOS (THE "FUNDS"), EACH
OF WHICH HAS SEPARATE INVESTMENT OBJECTIVES AND POLICIES. THE MUIRFIELD FUND'S
OBJECTIVE IS GROWTH OF CAPITAL THROUGH INVESTMENT IN THE SHARES OF OTHER MUTUAL
FUNDS. THE TRUST SEEKS TO ACHIEVE THE INVESTMENT OBJECTIVE OF THE MUIRFIELD FUND
(THE "FUND") BY INVESTING ALL OF THE INVESTABLE ASSETS OF THE FUND IN THE MUTUAL
FUND PORTFOLIO (THE "PORTFOLIO"), A CORRESPONDING OPEN-END MANAGEMENT INVESTMENT
COMPANY HAVING THE SAME INVESTMENT OBJECTIVE AS THE FUND. ACCORDINGLY, INVESTORS
SHOULD CAREFULLY CONSIDER THIS INVESTMENT APPROACH. FOR ADDITIONAL INFORMATION
REGARDING THIS UNIQUE CONCEPT, SEE "INVESTMENT OBJECTIVES AND POLICIES" ON PAGE
7 AND "OTHER INFORMATION--SHARES OF BENEFICIAL INTEREST AND INVESTMENT
STRUCTURE" ON PAGES 15 AND 16.
The Portfolio places a high degree of importance on maintaining and
protecting portfolio values from adverse market conditions. Consequently, the
Portfolio employs flexible investment strategies.
There are no commissions, fees or charges for the purchase or
redemption of shares, although the Trust has adopted Rule 12b-1 distribution
plans for using as much as 2/10 of 1% of net assets annually to aid in the
distribution of shares.
FLEXIBLE INVESTMENT STRATEGIES
The Mutual Fund Portfolio may be invested defensively, for temporary
periods, if the Portfolio's investment adviser deems it advisable because of
adverse market conditions. A defensive position will be adopted in a manner
which the investment adviser considers to be most consistent with the
Portfolio's objective, policies and restrictions.
This Prospectus sets forth basic information about the Trust and The
Muirfield Fund that a prospective investor should know before investing and it
should be retained for future reference. A STATEMENT OF ADDITIONAL INFORMATION,
dated April __, 1996, has been filed with the Securities and Exchange Commission
and is incorporated herein by reference. The Statement of Additional Information
is available upon request and without charge by contacting the Trust at the
address given above or by calling: 1-800-325-FLEX, or (614) 766-7000.
ADDITIONAL INFORMATION
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
INVESTMENT ADVISER: R. MEEDER & ASSOCIATES, INC.
PROSPECTUS--APRIL __, 1996
<PAGE> 78
- --------------------------------------------------------------------------------
Highlights
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE: The Muirfield Fund's investment objective is growth of
capital through investment in the shares of other mutual funds. The Trust seeks
to achieve the Fund's objective by investing all of the investable assets of the
Fund in a corresponding open-end management investment company (the "Portfolio")
having the same investment objective as the Fund. See "Investment Objectives and
Policies."
LIQUIDITY: The Trust is an open-end investment company. The Muirfield Fund
continuously offers and redeems shares of beneficial interest at the next
determined net asset value per share. See "How to Buy Shares" and "How to Make
Withdrawals (Redemptions)."
NO SALES OR REDEMPTION CHARGES: There are no commissions, fees or charges for
the purchase or redemption of shares. See "Synopsis of Financial Information,"
"How to Buy Shares" and "How to Make Withdrawals (Redemptions)."
RETIREMENT PLANS AND OTHER SHAREHOLDER SERVICES: The Trust offers retirement
plans, which include a prototype Profit Sharing Plan, Money Purchase Pension
Plan, Salary Savings Plan--401(K), Individual Retirement Account (IRA),
Simplified Employee Pension (SEP), and a number of other special shareholder
services.
MINIMUM INVESTMENT: A minimum investment of $2,500 is required to open an
account, except an IRA account, for which the minimum is $500. Subsequent
investments must be at least $100. The Trust has the right to redeem the shares
in an account and pay the proceeds to the shareholder if the value of the
account drops below $1,000 because of shareholder redemptions. The shareholder
will be given 30 days' written notice and an opportunity to restore his account
to $1,000 ($500 for an IRA). See "How to Buy Shares," "Other Shareholder
Services" and "Shareholder Accounts."
INVESTMENT ADVISER AND MANAGER: R. Meeder & Associates, Inc. is the Portfolios'
Investment Adviser and Manager (the "Investment Adviser" or the "Manager"). The
Manager has been an Investment Adviser to individuals, retirement plans,
corporations and foundations since 1974. See "The Trust and Its Management."
DISTRIBUTION PLAN: The Muirfield Fund has adopted a Rule 12b-1 distribution plan
for using as much as 2/10 of 1% of average net assets annually to aid in the
distribution of shares. See "Distribution Plan."
HOW TO BUY SHARES: Complete the New Account Application and forward with payment
as directed. Orders accompanied by payment (ordinary check, bank check, bank
wire, and money order) are accepted immediately and priced at the next
determined net asset value per share after receipt of the order. See "How to Buy
Shares" and "How Net Asset Value is Determined."
SHAREHOLDER INQUIRIES: Shareholder inquiries should be directed to the Fund by
writing or telephoning the Fund at the address or telephone number indicated on
the cover page of this Prospectus. To protect the confidentiality of shareholder
accounts, information relating to a
2
<PAGE> 79
specific account will be disclosed pursuant to a telephone inquiry if the
shareholder identifies the account by account number or by the taxpayer
identification number listed on the account.
- --------------------------------------------------------------------------------
SYNOPSIS OF FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE MUIRFIELD
FUND
-------------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sale Load Imposed on Purchases ................................................ none
Maximum Sales Load Imposed on
Reinvested Dividends ................................................................ none
Deferred Sales Load ................................................................... none
Redemption Fees........................................................................ none
Exchange Fee .......................................................................... none
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
Management Fees ....................................................................... 0.86%
Distribution Plan
(12b-1 Fees)**................................................................ 0.13%
Other Expenses......................................................................... 0.27%
----
TOTAL FUND OPERATING EXPENSES* ........................................................ 1.26%
</TABLE>
EXAMPLE
An investor would pay the following expense on a $1,000 investment,
assuming (1) a 5% annual return and (2) redemption at the end of each time
period.
<TABLE>
<CAPTION>
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------ ------ ------- ------- --------
<S> <C> <C> <C> <C>
The Muirfield Fund $ 13 $ 40 $ 69 $152
</TABLE>
*Expenses used in these illustrations are based upon expenses actually
incurred for both The Muirfield Fund and its corresponding Portfolio, the Mutual
Fund Portfolio, for the year ended December 31, 1995.
**Distribution Plan Expense: The Fund is party to agreements whereby
consultant companies or individuals (including two Trustees of the Portfolio),
are paid for explaining the Fund, its investment objectives and policies, and
the Trust's retirement plans, to clients. Other distribution plan expense
includes: the expense of printing and mailing prospectuses, periodic reports and
other sales materials to prospective investors; advertising; payment for
marketing programs and the services of public relations consultants; and the
cost of special telephone service to encourage the sale of Trust shares. (See
"Distribution Plan.")
3
<PAGE> 80
The table on the preceding page is meant to assist an investor in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. The Trust does not impose a sales charge, exchange
fee or redemption fee with the following exceptions. The custodian of IRA
accounts charges a $5.00 annual maintenance fee and the transfer agent charges
IRA accounts a $7.00 fee if the account is totally liquidated. For more complete
descriptions of the various costs and expenses of the Trust see "The Trust and
Its Management," and "Distribution Plan."
The Board of Trustees of the Fund believes that the aggregate per share
expenses of the Fund and the Portfolio will be less than or approximately equal
to the expenses which the Fund would incur if it retained the services of an
investment adviser and the assets of the Fund were invested directly in the type
of securities being held by the Portfolio. For additional information concerning
expenses incurred by the Fund and the Portfolio, see "The Trust and Its
Management" herein, and "Investment Adviser and Manager" in the Statement of
Additional Information.
The table and hypothetical example above are for illustrative purposes
only. The investment rate of return and expenses should not be considered as
representations of past or future performance as actual rates of return and
expenses may be more or less than the rate and amounts shown.
PERFORMANCE INFORMATION
From time to time the Fund may publish performance information and may
include such information in advertisements, sales literature or shareholder
reports. It will do so in accordance with methods which are described in the
Statement of Additional Information.
"Total return" quotations for The Muirfield Fund will be expressed in
terms of average annual compounded rates of return for the periods quoted, and
will assume that all dividends and distributions were reinvested in additional
shares. When applicable, the periods of time shown will be for a one-year
period; a five-year period and since inception.
Comparative performance information may be used from time to time in
advertising or marketing information relative to the Fund, including data from
Lipper Analytical Services, Inc., Morningstar Mutual Fund Report and other
publications.
The total return figure included in advertisements, sales literature or
shareholder reports will be based on historical performance and are not intended
to indicate future performance.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights for The Muirfield Fund are listed below. This
information has been audited in conjunction with the annual audit of the
financial statements of The Muirfield Fund and its corresponding Portfolio by
KPMG Peat Marwick LLP, independent certified public accountants, for each of
the periods ended December 31, 1988 through December 31, 1995.
4
<PAGE> 81
<TABLE>
<CAPTION>
THE MUIRFIELD FUND
---------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988*
---- ---- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of period $5.34 $5.36 $6.25 $6.43 $5.22 $5.84 $5.31 $5.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) 0.06 0.14 (0.01) 0.06 0.07 0.22 0.10 0.08
Net Gains or (Losses) on Securities
(both realized and unrealized) 1.31 0.00 0.45 0.34 1.41 (0.10) 0.62 0.23
- ---------------------------------------------------------------------------------------------------------------------------------
Total From Investment Operations 1.37 0.14 0.44 0.40 1.48 0.12 0.72 0.31
- ---------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends (from net investment income) (0.06) (0.14) (0.02) (0.06) (0.27) (0.10) (0.08) -
Distributions (from capital gains) (0.92) (0.02) (1.31) (052) - (0.64) (0.11) -
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.98) (0.16) (1.33) (0.58) (0.27) (0.74) (0.19) -
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $5.73 $5.34 $5.36 $6.25 $6.43 $5.22 $5.84 $5.31
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return 25.82% 2.70% 8.11% 6.91% 29.83% 2.33% 13.95% 6.20%
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period ($000) 111,751 83,119 73,063 55,280 43,276 29,482 26,031 24,589
Ratio of Expenses to Average Net Assets 1.26% 1.22% 1.26% 1.40% 1.50% 1.52% 1.53% 1.42%+
Ratio of Net Investment Income (Loss) to
Average Net Assets 0.97% 2.55% (0.13%) 1.05% 1.25% 4.46% 1.65% 5.02%+
Portfolio Turnover Rate N/A N/A N/A 324%(1) 107% 649% 202% 63%
</TABLE>
*For the period August 10, 1988 to December 31, 1988.
+Annualized
Financial Statements and Notes pertaining thereto appear in the Statement of
Additional Information Dated April __, 1996.
[/R]
5
<PAGE> 82
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE MUIRFIELD FUND VS. THE S&P 500 INDEX THE MUIRFIELD FUND
The Growth of $10,000 (8/10/88 to 12/31/95) AVERAGE ANNUAL
TOTAL RETURN
The Muirfield Fund The S&P 500 Index* 1 YEAR
<S> <C> <C> <C>
$10,000 $10,000 25.82%
1988 $10,620 $10,755
1989 $12,101 $14,143 5 YEARS
1990 $12,383 $13,691 14.15%
1991 $16,077 $17,880
1992 $17,188 $19,257 SINCE INCEPTION (8/10/88)
1993 $18,582 $21,163 12.58%
1994 $19,084 $21,438
1995 $24,011 $29,481
</TABLE>
1995 IN REVIEW.
The total return of The Muirfield Fund was 25.82 percent during 1995. This
compares with the return of the average Asset Allocation Fund, as reported by
Morningstar, Inc., of 23.84 percent during 1995. The S&P 500 Index provided a
return of 37.53 percent during 1995. The Muirfield Fund was fully exposed to the
stock market for much of the year. The Portfolio of The Muirfield Fund was
invested in mutual funds with large technology holdings for much of that time.
As technology issues cooled during the fourth quarter, The Muirfield Fund
adjusted its Portfolio accordingly, reducing exposure to funds with significant
high-tech exposure and emphasizing exposure to The S&P 500 Index and mutual
funds with exposure to large capitalization stocks.
Fully defensive as 1995 began, The Muirfield Fund was fully exposed to the stock
market in early January. In mid-March, the Fund adopted a 50 percent defensive
position. By the first week in June, The Muirfield Fund was again fully exposed
to the stock market where it remained until the fourth quarter of 1995. By
October, certain fundamental questions about the market's continued advance
began to indicate that the most prudent posture was to again adopt a partially
defensive position. The Muirfield Fund remained partially defensive until the
first week in December when it returned to a fully invested position.
The graph depicting the growth of $10,000 and the average annual total returns
for The Muirfield Fund are representative of past performance and are not
intended to indicate future performance.
The index does not reflect the deduction of expenses associated with a mutual
fund, such as investment management and accounting fees. The Fund's performance
reflects the deduction of fees for these value added services.
*The return of the index is from the beginning or end of the month
nearest the Fund's inception to the end of the calendar year.
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<PAGE> 83
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
- --------------------------------------------------------------------------------
The Muirfield Fund and the Mutual Fund Portfolio have their own
separate investment objectives and policies, as set forth below. These
investment objectives and policies, which are identical, are not fundamental and
may be changed by their respective Trustees without approval of the Fund's
shareholders, or approval of the Portfolio's investors. No such change would be
made in the Fund, or Portfolio, without 30 days written notice to shareholders.
The Trust seeks to achieve the Fund's investment objective by investing all of
its investable assets in the Portfolio. For more information concerning the
investment structure of the Fund which invests its assets in a corresponding
Portfolio, see "Other Information--Investment Structure."
Since the investment characteristics of the Fund will correspond
directly to those of the Portfolio, the following is a discussion of the various
investments of and techniques employed by the Portfolio. Additional information
about the investment policies of the Portfolio appears in the Statement of
Additional Information. There can be no assurance that the investment objectives
of the Fund and the Portfolio will be achieved.
The investment objective of the Portfolio is growth of capital. The
Portfolio will seek to attain its investment objective through investment in the
shares of open-end investment companies--commonly called mutual funds. The
underlying mutual funds will consist of diversified mutual funds which invest
primarily in common stock or securities convertible into or exchangeable for
common stock (such as convertible preferred stock, convertible debentures or
warrants) and which seek long-term growth or appreciation, with current income
typically of secondary importance. Underlying funds may include funds which
concentrate investments in a particular industry sector, or which leverage their
investments. The Portfolio will not invest in other Funds of the Flex-funds
family of Funds or the Flex-Partners family of funds, the corresponding
portfolios of which are also managed by the Investment Adviser.
The Portfolio will generally purchase "no-load" mutual funds, which are
sold and purchased without a sales charge. However, the Portfolio may purchase
"load" mutual funds only if the load, or sales commission, is by previous
agreement waived for purchases or sales made by the Portfolio.
The Portfolio may at times desire to gain exposure to the stock market
through the purchase of "Index" funds (funds which purchase stocks represented
in popular stock market averages) with a portion of its assets. "Index" funds
may be purchased with a portion of the Portfolio's assets at times when the
Investment Adviser's selection process identifies the characteristics of a
particular index to be more favorable than those of other mutual funds available
for purchase. If, in the Investment Adviser's opinion, the Portfolio should have
exposure to certain stock indices and the Portfolio can efficiently and
effectively implement such a strategy by directly purchasing the common stocks
of a desired index for the Portfolio itself, it may do so.
An investor in the Portfolio should recognize that he may invest
directly in mutual funds and that by investment in mutual funds indirectly
through the Portfolio, he will bear not only his proportionate share of the
expenses of the Portfolio (including operating costs and investment
7
<PAGE> 84
advisory and administrative fees) but also indirectly similar expenses of the
underlying mutual funds.
The Portfolio may invest in financial futures contracts or related options as a
hedge against changes, resulting from market conditions, in the values of
securities held or which the Portfolio intends to purchase. These financial
futures contracts or related options are considered derivatives. The values of
derivatives can be affected significantly by even small market movements,
sometimes in unpredictable ways. See "Additional Investment
Policies--Hedging Strategies."
See the Trust's Statement of Additional Information for other details.
- --------------------------------------------------------------------------------
ADDITIONAL INVESTMENT POLICIES
- --------------------------------------------------------------------------------
MONEY MARKET INSTRUMENTS AND BONDS
When investing in money market instruments or bonds, the Portfolio will
limit its purchases, to the following securities:
- U. S. Government Securities and Securities of its Agencies and
Instrumentalities.
- Bank Obligations and Instruments Secured Thereby.
- High Quality Commercial Paper--The Mutual Fund Portfolio may
invest in commercial paper rated no lower than "A-2" by Standard &
Poor's Corporation or "Prime-2" by Moody's Investors Services,
Inc., or, if not rated, issued by a company having an outstanding
debt issue rated at least A by Standard & Poor's or Moody's.
- Private Placement Commercial Paper--unregistered securities
which are traded in public markets to qualified institutional
investors, such as the Portfolio.
- High Grade Corporate Obligations--obligations rated at least A by
Standard & Poor's or Moody's.
- Repurchase Agreements Pertaining to the Above--The Portfolio may
invest without limit in any of the above securities subject to
repurchase agreements with any Federal Reserve reporting dealer or
member bank of the Federal Reserve System. Repurchase agreements
usually are for short periods, such as one week or less, but could
be longer. The Portfolio will not invest more than 10% of its
assets, at time of purchase, in repurchase agreements which mature
in excess of seven days or in other illiquid or not readily
marketable securities.
HEDGING STRATEGIES
The Portfolio may engage in hedging transactions in carrying out their
investment policies. A hedging program may be implemented for the following
reasons: (1) To protect the value of specific securities owned or intended to be
purchased while the Investment Adviser is implementing a change in the
Portfolio's investment position; (2) To protect portfolio values during periods
of extraordinary risk without incurring transaction costs associated with buying
or selling actual securities; and (3) To utilize the "designated hedge"
provisions of Sub-Chapter M of the Internal Revenue Code as a permitted means of
avoiding taxes that would otherwise have to be paid on gains from the sale of
portfolio securities.
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<PAGE> 85
A hedging program involves entering into an "option" or "futures"
transaction in lieu of the actual purchase or sale of securities. At present,
many groups of common stocks (stock market indices) may be made the subject of
futures contracts, while government securities such as Treasury Bonds and Notes
are among debt securities currently covered by futures contracts.
Derivatives are financial instruments whose performance is derived, at
least in part, from the performance of an underlying assets, security or index.
Accordingly, these financial futures contracts or related options used by the
Portfolio to implement is hedging strategies are considered derivatives. The
value of derivatives can be affected significantly by even small market
movements, sometimes in unpredictable ways. They do not necessarily increase
risk, and may in fact reduce risk.
The Portfolio will not engage in transactions in financial futures
contracts or related options for speculation but only as a hedge against changes
in the market value of securities held in the Portfolio, or which it intends to
purchase, and where the transactions are economically appropriate to the
reduction of risks inherent in the ongoing management of the Portfolio.
For certain regulatory purposes, the Commodity Futures Trading
Commission ("CFTC") limits the types of futures positions that can be taken in
conjunction with the management of a securities portfolio for mutual funds, such
as The Flex-funds. All futures transactions for the Portfolio will consequently
be subject to the restrictions on the use of futures contracts established in
CFTC rules, such as observation of the CFTC's definition of "hedging." In
addition, whenever the Portfolio establishes a long futures position, it will
set aside cash or cash equivalents equal to the underlying commodity value of
the long futures contracts held by the Portfolio. Although all futures contracts
involve leverage by virtue of the margin system applicable to trading on futures
exchanges, the Portfolio will not, on a net basis, have leverage exposure on any
long futures contracts that it establishes because of the cash set aside
requirement. All futures transactions can produce a gain or a loss when they are
closed, regardless of the purpose for which they have been established. Unlike
short futures contracts positions established to protect against the risk of a
decline in value of existing securities holdings, the long futures positions
established by the Portfolio to protect against reinvestment risk are intended
to protect the Portfolio against the risks of reinvesting portfolio assets that
arise during periods when the assets are not fully invested in securities.
The Portfolio may not purchase or sell financial futures or purchase
related options if immediately thereafter the sum of the amount of margin
deposits on the Portfolio's existing futures positions and premiums paid for
related options would exceed 5% of the market value of the Portfolio's total
assets.
The Portfolio expects that any gain or loss on hedging transactions
will be substantially offset by any gain or loss on the securities underlying
the contracts or being considered for purchase. There can be no guaranty that
the Portfolio will be able to realize this objective and, as noted below under
"Risk Factors," there are some risks in utilizing a hedging strategy.
9
<PAGE> 86
RISK FACTORS
The Mutual Fund Portfolio will be invested in securities which
fluctuate in market value, so net asset value per share will fluctuate as well.
The Mutual Fund Portfolio is by definition a non-diversified fund. It may have
more than five percent of its assets invested in one fund. If the underlying
fund performs poorly, this could negatively impact the value of the Portfolio.
Thus, there is no guarantee that a shareholder will receive the full amount of
his investment upon the redemption of shares. The Portfolio does, however, seek
to minimize the risk of loss through a selection of diversified funds and, at
times, the use of hedging techniques and defensive investment strategies.
Hedging involves risks which are not present in some other mutual funds with
similar objectives (See "Hedging Strategies.")
Put and call option contracts involve some risk. For example, the total
premium paid for an option contract could be lost if the Portfolio does not sell
the contract or exercise the contract prior to its expiration date.
Futures contracts likewise involve some risk. It is possible that the
contract(s) selected by the Investment Adviser will not follow exactly the price
movement of the securities covered by the contract. If this occurs, the
objective of the hedging strategy may not be successful.
Although the Portfolio will invest in a number of underlying mutual
funds, this practice will not eliminate investment risk. To the extent that the
Mutual Fund Portfolio invests in underlying funds which leverage investments or
concentrate investments in one industry, an investment in the Portfolio will
indirectly entail the additional risks associated with these practices.
Leveraged mutual funds may have higher volatility than the over-all market or
other mutual funds. This may result in greater gains or losses than the over-all
market or other non-leveraged mutual funds. Mutual funds which concentrate
investments in a single industry lack normal diversification and are exposed to
losses stemming from negative industry-wide developments.
The Portfolio may invest in private placement commercial paper and
repurchase agreements with banks and securities brokers.
All repurchase agreements entered into by the Portfolio will be fully
collateralized. The Portfolio's risk is that the seller may fail to repurchase
the security on the delivery date. If the seller defaults, the underlying
security constitutes collateral for the seller's obligation to pay. It is a
policy of the Portfolio to make settlement on repurchase agreements only upon
proper delivery of the underlying collateral. In the event of a bankruptcy or
other default of a seller of a repurchase agreement to the Portfolio, the
Portfolio could encounter delays and expenses in enforcing its rights and could
experience losses, including a decline in the value of the underlying securities
and loss of income.
Private placement commercial paper ("Rule 144A securities") consists of
unregistered securities which are traded in public markets to qualified
institutional investors, such as the Portfolio. The Portfolio's risk is that the
universe of potential buyers for the securities, should the Portfolio desire to
liquidate a position, is limited to qualified dealers and institutions, and
therefore such securities could have the effect of being illiquid.
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<PAGE> 87
PORTFOLIO TURNOVER
Because the Manager intends to employ flexible defensive investment
strategies when market trends are not considered favorable, the Manager may
occasionally change the entire portfolio in the Portfolio. High transaction
costs could result when compared with other funds. Trading may also result in
realization of net short-term capital gains upon which shareholders may be taxed
at ordinary tax rates when distributed from a Fund.
This defensive investment strategy can produce high portfolio turnover
ratios when calculated in accordance with SEC rules. However, viewed in terms of
"round trips," The Mutual Fund completed one and one-half "round trips" in the
stock market during the year ended December 31, 1995.
The Portfolio's annual portfolio turnover rate is not expected to
exceed 300%.
The Portfolio intends to comply with the short-term trading
restrictions of Subchapter M of the Internal Revenue Code of 1986, as amended,
although these restrictions could inhibit a rapid change in the Portfolio's
investments. The Portfolio will strive for a positive investment return each
calendar year.
- --------------------------------------------------------------------------------
THE TRUST AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
The Trust is a diversified, open-end management investment company
organized as a Massachusetts Business Trust on December 31, 1991 as the
successor to a Pennsylvania Business Trust organized on April 30, 1982. The
Trust's offices are at 6000 Memorial Drive, Dublin, OH 43017. The business and
affairs of the Trust are under the direction of its Board of Trustees.
Neither the Trust nor the Fund has an investment adviser because the
Trust seeks to achieve the investment objective of the Fund by investing its
assets in the Portfolio. The Portfolio has retained the services of R. Meeder &
Associates, Inc. as investment adviser.
R. Meeder & Associates, Inc. (the "Manager"), has been an investment
adviser to individuals and retirement plans since 1974. The Manager served as
the Fund's investment adviser from its inception in 1988 until January of 1993,
at which time the investment by the Fund in the Portfolio was implemented. The
Manager serves the Portfolio pursuant to an Investment Advisory Contract under
the terms of which it has agreed to provide an investment program within the
limitations of the Portfolio's investment policies and restrictions, and to
furnish all executive, administrative, and clerical services required for the
transaction of Portfolio business, other than accounting services and services
which are provided by the Portfolio's custodian, transfer agent, independent
accountants and legal counsel.
The Manager was incorporated in Ohio in 1974 and maintains its
principal offices at 6000 Memorial Drive, Dublin, OH 43017. The Manager is a
wholly-owned subsidiary of Muirfield Investors, Inc. ("MII"). MII is controlled
by Robert S. Meeder, Sr. through ownership of voting common stock. MII conducts
business only through its five subsidiaries which are the Manager; Mutual Funds
Service Co., the Trust's transfer agent; Opportunities Management Co., a venture
11
<PAGE> 88
capital investor; Meeder Advisory Services, Inc., a registered investment
adviser and OMCO, Inc., a registered commodity trading adviser and commodity
pool operator.
The Manager's officers and directors, their principal offices are as
follows: Robert S. Meeder, Sr., Chairman and Sole Director; Robert S. Meeder,
Jr., President; G. Robert Kincheloe, Senior Vice President; Philip A. Voelker,
Senior Vice President; Donald F. Meeder, Vice President and Secretary; Sherrie
L. Acock, Vice President; Robert D. Baker, Vice President, Wesley F. Hoag,
General Counsel and Chief Operating Officer; and Steven T. McCabe, Vice
President.
Robert S. Meeder, Jr., is the portfolio manager primarily responsible
for the day-to-day management of the Mutual Fund Portfolio. Mr. Meeder is a
Trustee and Vice President of The Flex-funds, Vice President of the Mutual Fund
Portfolio and President of R. Meeder & Associates, Inc. Mr. Meeder has been
associated with the Manager since 1983 and has managed the Portfolio since 1988.
The Manager earns an annual fee, payable in monthly installments, for
the Portfolio at the rate of 1% of the first $50 million, 0.75% of the next $50
million and 0.60% in excess of $100 million of the Portfolio's average net
assets. These fees are higher than the fees charged to most other investment
companies.
Accounting, stock transfer, dividend disbursing, and shareholder
services are provided to the Portfolio and the Fund by Mutual Funds Service Co.,
6000 Memorial Drive, Dublin, Ohio 43017, a wholly-owned subsidiary of MII. The
minimum annual fee, payable monthly, for accounting services in the Portfolio is
$7,500. Subject to the applicable minimum fee, the fee is computed at the rate
of 0.15% of the first $10 million, 0.10% of the next $20 million, 0.02% of the
next $50 million and 0.01% in excess of $80 million of the Portfolio's average
net assets. In addition, the Fund incurs (subject to a $4,000 annual minimum
fee) an annual fee of the greater of $15 per shareholder account or 0.10% of the
Fund's average net assets, payable monthly, for stock transfer, dividend
disbursing and shareholder support services. Mutual Funds Service Co. also
serves as Administrator to the Fund pursuant to an Administration Services
Agreement which was effective February 1, 1995. Services provided to the Fund
include coordinating and monitoring any third party services to the Fund;
providing the necessary personnel to perform administrative functions for the
Fund; assisting in the preparation, filing and distribution of proxy materials,
periodic reports to Trustees and shareholders, registration statements and other
necessary documents. The Fund incurs an annual fee, payable monthly, of .03% of
the Fund's average net assets. These fees are reviewable annually by the
respective Trustees of the Trust and the Portfolio. For the year ended December
31, 1995, total payments to Mutual Funds Service Co. amounted to $166,598 for
the Fund and Portfolio collectively.
Pursuant to a Subadministrative Services Agreement with Mutual Funds
Service Co., Signature Broker-Dealer Services, Inc. ("Signature"), as
Subadministrator, is responsible for conducting certain day-to-day
administration of the Funds subject to the supervision and direction of Mutual
Funds Service Co.
Information concerning the Trustees and officers of both the Trust and
the Portfolio appears in the Statement of Additional Information.
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<PAGE> 89
- --------------------------------------------------------------------------------
DISTRIBUTION PLAN
- --------------------------------------------------------------------------------
The Trust has adopted a distribution expense plan (the "Plan") which
authorizes The Muirfield Fund to bear a portion of the expense of any activity
which is primarily intended to result in the sale of Fund shares. This Plan
permits, among other things, payment for distribution in the form of commissions
and fees, advertising, the services of public relations consultants, and direct
solicitation. Possible recipients include securities brokers, attorneys,
accountants, investment advisers, investment performance consultants, pension
actuaries, banks, and service organizations, all of them being hereafter
referred to as "Consultants."
The Trust may expend in the Fund as much as, but not more than, 2/10 of
1% of its average net assets annually pursuant to the Plan. The Fund does not
make Plan payments with respect to any of the other Funds of the Trust, nor are
any of its Plan payments made by any of the other Funds.
The Plan was approved by the Board of Trustees, who made a
determination that there is a reasonable likelihood that the Plan will benefit
the Trust.
The Trust has entered into agreements whereby Consultants (including
two Trustees of the Portfolios) are paid for their assistance in explaining and
interpreting the Trust, its investment objectives and policies, and its
retirement plans to their clients. Under these agreements, Consultants are paid
quarterly compensation by the Trust on the average value of Muirfield Fund
shares held by their clients. Although the compensation is thus seen to be
continuing, the Trust retains the right to terminate any Consultant's agreement
on 60 days' notice, without further obligation beyond the date of termination.
Although the objective of the Trust is to pay Consultants for a portion
of the expenses they incur and to provide them with some incentive to be of
assistance to the Trust and its shareholders, no effort has been made to
determine the actual expenses incurred by Consultants. If any Consultant's
expenses are in excess of what the Trust pays, such excess will not be paid by
the Trust. Conversely, if the Consultant's expenses are less than what the Trust
pays, the Consultant is not obligated to refund the excess, and this excess
could represent a profit for the Consultant.
Total payments made in The Muirfield Fund under the Distribution Plan
for the period ended December 31, 1995, as a percentage of average net assets,
amounted to 0.13%. (See "Synopsis of Financial Information.")
- --------------------------------------------------------------------------------
INCOME DIVIDENDS AND TAXES
- --------------------------------------------------------------------------------
It is the policy of the Trust to distribute substantially all of its
net income. The Fund's net income consists of the income it earns from its
investment in the Mutual Fund Portfolio, less expenses. The Fund also intends to
distribute its net capital gains, if any, to its shareholders annually.
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<PAGE> 90
The Muirfield Fund declares and pays dividends from net investment
income, if any, on a quarterly basis. All such dividends of net income are
automatically reinvested in additional shares at the net asset value on the last
business day of each month. A shareholder may elect to receive such dividends in
cash either by checking the appropriate box on the New Account Application, or
by notifying the Trust in writing.
The Internal Revenue Code of 1986 imposes on the Fund a nondeductible
excise tax unless the Fund distributes annually at least 98% of its net
investment income earned during the calendar year, at least 98% of capital gain
net income realized in the 12 months preceding October 31, and any undistributed
balances from the previous year. In addition, the Tax Reform Act of 1986 (the
"Tax Act") provides that any dividend declared by a Fund in October, November,
or December and paid in January will be deemed to have been paid by the Fund and
to have been received by each shareholder in December. Distribution dates and
the amounts paid, if any, are subject to determination by the Board of Trustees.
Dividends and capital gains distributions are ordinarily taxable to
shareholders in the year distributed. However, under the Tax Act, the Fund is
permitted to make distributions up to February 1 and have them apply to the
previous tax year. The Muirfield Fund expects to make such a distribution in
future years.
A shareholder is taxed on capital gains and income realized by the
Fund, regardless of the length of time he has been a shareholder. Thus a
shareholder may receive capital gains distributions shortly after purchasing
shares, and this will reduce the market value of the shares by the amount of the
distribution. The shareholder will not be able to recognize the resultant loss
in value for tax purposes until the shares are sold at a later date. In the case
of some mutual funds this effect can be substantial. In the case of The
Muirfield Fund, which frequently liquidates its portfolio for defensive purposes
and therefore tends not to realize large capital gains accumulated over a long
period of time, the effect is not expected to be substantial.
Dividends and capital gains distributions are taxable to the
shareholder whether received in cash or reinvested in additional shares.
Shareholders not otherwise subject to tax on their income will not be required
to pay tax on amounts distributed to them. Each Shareholder will receive a
statement annually informing him of the amount of the income and capital gains
which have been distributed during the calendar year.
The Trust files federal income tax returns for each of its Funds. Each
Fund is treated as a separate entity for federal income tax purposes. The Fund
also intends to comply with Subchapter M of the Internal Revenue Code, which
imposes such restrictions as (1) appropriate diversification of its portfolio of
investments; (2) realization of 90% of its annual gross income from dividends,
interest, and gains from the sale of securities and (3) realization of less than
30% of gross income from gains on the sale of securities held less than three
months. The Fund might deviate from this policy, and incur a tax liability, if
this were necessary to fully protect shareholder values. The Trust qualified as
a "regulated investment company" for each of the last thirteen fiscal years.
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<PAGE> 91
The foregoing discussion of taxes is limited to federal income taxes.
Distributions, whether in cash or in kind may be subject to state and local
taxes. Shareholders are urged to consult their tax advisers regarding specific
questions relating to federal, state, and local taxes.
The Fund is required to withhold and remit to the federal government
31% of any reportable payments (which may include dividends, capital gains
distributions, if any, and redemptions) paid to certain shareholders. In order
to avoid this withholding requirement, each shareholder must certify on the New
Account Application that the social security or taxpayer identification number
is correct and that the shareholder is not currently subject to backup
withholding or is exempt from backup withholding.
- --------------------------------------------------------------------------------
HOW NET ASSET VALUE IS DETERMINED
- --------------------------------------------------------------------------------
Net asset value per share is determined at each closing of the New York
Stock Exchange each day the Exchange is open for business and each other day
during which there is a sufficient degree of trading that the current net asset
value of a Fund's shares might be materially affected by changes in the value of
the securities held by the Portfolio. Net asset value is obtained by dividing
the value of the Fund's assets (i.e., the value of its investment in the
Portfolio and other assets), less its liabilities, by the total number of its
shares of beneficial interest outstanding at the time.
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
SHARES OF BENEFICIAL INTEREST
The Trust's Declaration of Trust permits the Trust to offer and sell an
unlimited number of full and fractional shares of beneficial interest with a par
value of $.10 per share. Shares are fully paid, nonassessable and fully
transferable when issued. All shares are issued as full or fractional shares.
A fraction of a share has the same rights and privileges as a full
share. Each Fund of the Trust will issue its own series of shares of beneficial
interest. The shares of each Fund represent an interest only in that Fund's
assets (and profits or losses) and in the event of liquidation, each share of a
particular Fund would have the same rights to dividends and assets as every
other share of that Fund.
Each full or fractional share has a proportionate vote. On some issues,
such as the election of Trustees, all shares of the Trust vote together as one
series. On an issue affecting a particular Fund, only its shares vote as a
separate series. An example of such an issue would be a fundamental investment
restriction pertaining to only one Fund. In voting on a Distribution Plan,
approval of the Plan by the shareholders of a particular Fund would make the
Plan effective as to that Fund, whether or not it had been approved by the
shareholders of the other Funds.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of such a business trust
may, under certain
15
<PAGE> 92
circumstances, be held personally liable as partners for its obligations.
However, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which both inadequate
insurance existed and the Trust itself was unable to meet its obligations.
When matters are submitted for shareholder vote, shareholders of each
Fund will have one vote for each full share held and proportionate, fractional
votes for fractional shares held. A separate vote of a Fund is required on any
matter affecting the Fund on which shareholders are entitled to vote.
Shareholders of one Fund are not entitled to vote on a matter that does not
affect that Fund but that does require a separate vote of any other Fund. There
normally will be no meetings of shareholders for the purpose of electing
Trustees unless and until such time as less than a majority of Trustees holding
office have been elected by shareholders, at which time the Trustees then in
office will call a shareholders' meeting for the election of Trustees. Any
Trustee may be removed from office upon the vote of shareholders holding at
least two-thirds of the Trust's outstanding shares at a meeting called for that
purpose. The Trustees are required to call such a meeting upon the written
request of shareholders holding at least 10% of the Trust's outstanding shares.
Shareholders have under certain circumstances (e.g., upon application and
submission of certain specified documents to the Trustees of a Fund by a
specified number of shareholders) the right to communicate with other
shareholders in connection with requesting a meeting of shareholders for the
purpose of removing one or more Trustees.
The Portfolio, in which all the assets of a corresponding Fund will be
invested, is organized as a trust under the laws of the State of New York. The
Portfolio's Declaration of Trust provides that the Fund and other entities
investing in the Portfolio (e.g., other investment companies, insurance company
separate accounts, and common and commingled trust funds) will each be liable
for all obligations of that Portfolio. However, the risk of the Fund incurring
financial loss on account of such liability is limited to circumstances in which
both inadequate insurance existed and that the Portfolio itself was unable to
meet its obligations. Accordingly, the Trustees of the Trust believe that
neither the Fund nor its shareholders will be adversely affected by reason of
the Fund's investing in the Portfolio. In addition, whenever the Trust is
requested to vote on matters pertaining to the fundamental policies of the
Portfolio, the Trust will hold a meeting of the corresponding Fund's
shareholders and will cast its vote as instructed by the Fund's shareholders.
INVESTMENT STRUCTURE
Unlike other mutual funds which directly acquire and manage their own
portfolio of securities, the Fund seeks to achieve its investment objectives by
investing all of its assets in the Portfolio, a separate registered investment
company with the same investment objectives as the Fund. Therefore, an
investor's interest in the Portfolio's securities is indirect. In addition to
selling a beneficial interest to the Fund, the Portfolio may sell beneficial
interests to other mutual funds or institutional investors. Such investors will
invest in the Portfolio on the same terms and conditions and will pay a
proportionate share of the Portfolio's expenses. However, the other investors
investing in the Portfolio are not required to sell their shares at the same
public offering price as the Fund. Investors in the Fund should be aware that
these differences may result in differences in returns experienced by investors
in the different funds that invest in the Portfolio. Such differences in returns
are also present in other mutual fund structures. Information
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<PAGE> 93
concerning other holders of interests in the Portfolio is available by
contacting the Trust by calling: 1-800-325-FLEX, or (614) 766-7000.
Smaller funds investing in the Portfolio may be materially affected by
the actions of larger funds investing in the Portfolio. For example, if a large
fund withdraws from the Portfolio, the remaining funds may experience higher pro
rata operating expenses, thereby producing lower returns. Additionally, the
Portfolio may become less diverse, resulting in increased portfolio risk.
(However, this possibility also exists for traditionally structured funds which
have large or institutional investors.) Also, funds with a greater pro rata
ownership in the Portfolio could have effective voting control of the operations
of the Portfolio. Whenever the Trust is requested to vote on matters pertaining
to the Portfolio, the Trust will hold a meeting of shareholders of the Fund and
will cast all of its votes in the same proportion as do the Fund's shareholders.
Certain changes in the Portfolio's investment objectives, policies or
restrictions may require the Trust to withdraw the Fund's interest in the
Portfolio. Any such withdrawal could result in a distribution in kind of
portfolio securities (as opposed to a cash distribution from the Portfolio). If
such securities are distributed, the Fund could incur brokerage, tax or other
charges in converting the securities to cash. In addition, the distribution in
kind may result in a less diversified portfolio of investments or adversely
affect the liquidity of the Fund.
The Fund may withdraw its investment from the Portfolio at any time, if
the Board of Trustees of the Trust determines that it is in the best interests
of the Fund to do so. Upon any such withdrawal, the Board of Trustees would
consider what action might be taken, including the investment of all the assets
of the Fund in another pooled investment entity having the same investment
objectives as the Fund or the retaining of an investment adviser to manage the
Fund's assets in accordance with the investment policies with respect to the
Fund's Portfolio. The inability to find an adequate investment pool or
investment adviser could have a significant impact on shareholders' investment
in the Fund.
As stated in "Investment Objectives and Policies," the Fund's
investment objectives and policies are not fundamental and may be changed by
Trustees without shareholder approval. (No such change would be made, however,
without 30 days' written notice to shareholders.)
For descriptions of the investment objectives and policies of the
Portfolio, see "Investment Objectives and Policies" and "Additional Investment
Policies." For descriptions of the management and expenses of the Portfolio, see
"The Fund and Its Management" herein, and "Investment Adviser and Manager" and
"Officers and Trustees" in the Statement of Additional Information.
- --------------------------------------------------------------------------------
HOW TO BUY SHARES
- --------------------------------------------------------------------------------
Shares are offered continuously and sold without a direct sales charge,
although the Trust does pay some consultants for services in explaining the
Funds, their investment policies and restrictions, and retirement plans to their
clients. (See "Distribution Plan" and "Synopsis of Financial Information".)
Shares of The Muirfield Fund are sold at the net asset value per share next
determined after receipt by The Muirfield Fund or the authorized service agent
or sub-agent of both a purchase order and payment. (See "How Net Asset Value is
Determined.") Investments made by check are entered and
17
<PAGE> 94
credited at the net asset value determined on the next business day following
receipt. Net asset value generally changes each day.
MINIMUM INVESTMENT--The minimum investment to open an account is
$2,500 except an Individual Retirement Account (IRA) which has a $500 minimum.
Subsequent investments in any account may be made in amounts of at least $100.
OPENING AN ACCOUNT --You may open an account by mail or bank wire as
follows:
By Mail: To purchase shares, fill out the New Account Application
accompanying this Prospectus. A check payable to The Muirfield Fund
must accompany the New Account Application and should be mailed to the
following address:
THE FLEX-FUNDS, C/O R. MEEDER & ASSOCIATES, INC., P.O. BOX 7177,
DUBLIN, OHIO 43017
By Bank Wire: If the wire order is for a new account in the Trust, you
must telephone the Fund prior to making your initial investment. Call
1-800-325-FLEX, or (614) 766-7000. Advise the Fund of the amount you
wish to invest and obtain an account number and instructions. Have your
bank wire federal funds to:
STAR BANK, N.A. CINTI/TRUST
(ABA #: 042-00001-3)
ATTENTION: THE FLEX-FUNDS
MUIRFIELD FUND
Credit Account Number (account number for Fund as follows):
Muirfield Fund--
Account Number 930-5731
Account Name (your name)
Personal Account No. (your Muirfield Fund account number)
On new accounts, a completed application must be sent to The Flex-funds
c/o R. Meeder & Associates, Inc., P.O. Box 7177, Dublin, OH 43017 on the same
day your wire is sent. The Trust will not permit redemptions until it receives
the New Account Application in good order.
SUBSEQUENT INVESTMENTS--Subsequent investments in an existing account
in the Fund may be made by mailing a check payable to The Muirfield Fund (please
include your account number on the check) and mail as follows:
THE FLEX-FUNDS
LOCATION NUMBER: 00215
CINCINNATI, OH 45264-0215
18
<PAGE> 95
Subsequent investments may also be made by bank wire as described
above. It is necessary to notify the Fund prior to each wire purchase. Wires
sent without notifying the Fund will result in a delay of the effective date of
your purchase.
AUTOMATIC ACCOUNT BUILDER--Periodic investments in an existing account
can be made by selecting this option. (See "Other Shareholder Services.")
WHEN PURCHASES ARE EFFECTIVE--Shares of The Muirfield Fund are sold at
net asset value per share next determined after receipt of both a purchase order
and payment.
If a shareholder's check is dishonored, the purchase and any dividends
paid thereon, if any, will be reversed. If shares are purchased with federal
funds, they may be redeemed at any time thereafter and the shareholder may
secure his funds as explained below. (See "How to Make Withdrawals
(Redemptions).") However, if shares are purchased by check(s) or the Automatic
Account Builder, Mutual Funds Service Co. will delay payment of redemption
proceeds until the check used to purchase shares, or Automatic Account Builder
order, has cleared which could be fifteen (15) calendar days or more subsequent
to the purchase of the shares. The Fund will forward the proceeds promptly once
the check has cleared.
FINANCIAL INSTITUTIONS--You may buy shares or sell shares of the Fund
through a broker or financial institution who may charge you a fee for this
service. If you are purchasing shares of the Fund through a program of services
offered or administered by a securities dealer or financial institution, you
should read the program materials in conjunction with this Prospectus.
Certain financial institutions that have entered into sales agreements
with the Trust may enter confirmed purchase orders on behalf of customers by
telephone to purchase shares of the Fund. Payment is due no later than the
Fund's pricing on the following business day. If payment for the purchase of
shares is not received in a timely manner, the financial institution could be
held liable for any loss incurred by the Fund.
- --------------------------------------------------------------------------------
HOW TO MAKE WITHDRAWALS (REDEMPTIONS)
- --------------------------------------------------------------------------------
Shares are redeemed and funds withdrawn at net asset value per share,
and there are no redemption fees. (See "How Net Asset Value Is Determined.")
BY MAIL--A shareholder may redeem shares by mailing a written request
in good order to The Flex-funds, c/o R. Meeder and Associates, Inc., P.O. Box
7177, Dublin, OH 43017. Good order means that the request must be signed by the
shareholder(s) and the signature(s) must be guaranteed by an eligible guarantor
institution (a bank, broker-dealer, credit union, securities exchange and
association, clearing agency and savings association). The Trust does not accept
signatures guaranteed by a notary public. Further documentation may be required
as to the authority of the person requesting redemption of shares held of record
in the name of corporations, executors, administrators, trustees, guardians or
other fiduciaries. The Trust may waive these requirements in certain instances.
19
<PAGE> 96
Amounts withdrawn are mailed without charge to the address printed on
your account statement.
BY TELEPHONE--A shareholder may redeem by telephone: 1-800-325-FLEX, or
call (614) 766-7000. Shareholders who wish to use this procedure must so elect
on the New Account Application. Amounts withdrawn from an account by telephone
are mailed without charge to the address printed on your account statement.
As a special service, a shareholder may arrange to have amounts in
excess of $1,000 wired in federal funds to a designated commercial bank account.
To use this procedure please designate on the New Account Application a bank and
bank account number to receive the proceeds of wire withdrawals. There is no
charge for this service.
A shareholder may change the bank account designated to receive
redemptions. This may be done at any time upon written request to the Trust. The
shareholder's signature must be guaranteed. Further documentation may be
required from corporations, executors, administrators, trustees, guardians, or
other fiduciaries.
Neither the Trust nor Mutual Funds Service Co. ("MFSCo") will be
responsible for any loss, expense, or cost arising from any telephone redemption
request made according to the authorization set forth in the New Account
Application if they reasonably believe such request to be genuine and follow
reasonable procedures designed to verify the identity of the person requesting
the redemption. If MFSCo fails to follow reasonable procedures MFSCo or the
Trust may be liable for losses due to unauthorized or fraudulent transactions.
MFSCo will provide each investor seeking telephone redemption privileges with a
personalized security code which, along with other information, will be required
of the caller upon request of a telephone redemption. Other information may also
be required and calls may be recorded.
WHEN REDEMPTIONS ARE EFFECTIVE--Redemptions are made at the net asset
value per share next determined after receipt of a redemption request in good
order. (See "How Net Asset Value Is Determined.")
WHEN PAYMENTS ARE MADE--Amounts withdrawn by telephone are normally
mailed or wired on the next Columbus, Ohio business day following the effective
date of the order for withdrawal. Amounts withdrawn by mail are normally sent by
mail within one business day after request is received, and must be mailed
within seven days with the following exception: If shares are purchased by
check, Mutual Funds Service Co. will not pay a redemption until reasonably
satisfied the check used to purchase shares has been collected which could be
fifteen (15) calendar days or more after shares are first paid for, unless
payment was made with federal funds. The Fund will forward proceeds promptly
once the check has cleared. (See "How to Buy Shares.")
20
<PAGE> 97
- --------------------------------------------------------------------------------
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
A shareholder may exchange shares of the Fund for shares of any other
Flex-funds' fund that are available for sale in your state at their respective
net asset values. Exchanges are subject to applicable minimum initial and
subsequent investment requirements.
It will be necessary to complete a separate New Account Application if:
1. a shareholder wishes to register a new account in a
different name;
2. a shareholder wishes to add telephone redemption to an
account; or
3. a shareholder wishes to have check-writing redemption
privileges in a Money Market Fund account.
Exchange requests may be directed to the Fund by telephone or written
request. If a shareholder request is in valid form, and is accepted before the
close of the Fund's business day, shares will be exchanged that day.
BY MAIL:
Exchange requests may also be made in writing and should be sent to The
Flex-funds, c/o R. Meeder and Associates, Inc., P. O. Box 7177, Dublin, Ohio
43017. The letter must be signed exactly as the shareholder's name appears on
the Fund's account records.
BY TELEPHONE:
Exchange requests may be made by telephone: call 1-800-325-FLEX, or
call (614) 766-7000. You may make exchanges by telephone if you have telephone
redemption privileges for your current investment account and the registration
of additional accounts will be identical. Neither the Fund nor Mutual Funds
Service Co. ("MFSCo") will be responsible for any loss, expense, or cost arising
from any telephone exchange request made according to the authorization set
forth in the New Account Application if they reasonably believe such request to
be genuine and follow reasonable procedures designed to verify the identity of
the person requesting the exchange. If MFSCo fails to follow reasonable
procedures MFSCo or the Fund may be liable for losses due to unauthorized or
fraudulent transactions. MFSCo will provide each investor seeking telephone
exchange privileges with a personalized security code which, along with other
information, will be required of the caller upon request of a telephone
exchange. Other information may also be required and calls may be recorded.
Any exchange involves a redemption of all or a portion of the shares in
the Fund and an investment of the redemption proceeds in shares of one of the
other Flex-funds' funds. The exchange will be based on the respective net asset
values of the shares involved, ordinarily at the value next determined after the
request is received. An exchange may be delayed briefly if redemption proceeds
will not be available immediately for purchase of newly acquired shares. The
exchange privilege may be modified or terminated at any time. The exchange
privilege is
21
<PAGE> 98
designed to accommodate changes in shareholder investment objectives. In
addition, the Muirfield Fund reserves the right to reject any
exchange request and to limit a shareholder's use of the exchange privilege.
The exchange of shares of the Fund for shares of another Flex-funds'
fund is treated for federal income tax purposes as a sale of the shares given in
exchange. A shareholder may realize a taxable gain or loss on an exchange, and
he should consult his tax adviser for further information concerning the tax
consequences of an exchange.
- --------------------------------------------------------------------------------
FLEX-FUNDS RETIREMENT PLANS
- --------------------------------------------------------------------------------
The Trust offers retirement plans which include a prototype Profit
Sharing Plan, a Money Purchase Pension Plan, a Salary Savings Plan - 401(K), an
Individual Retirement Account (IRA), and a Simplified Employee Pension (SEP)
Plan. Plan Adoption Agreements and other information required to establish a
Flex-funds Retirement Plan are available from The Flex-funds, c/o R. Meeder &
Associates, Inc., P.O. Box 7177, Dublin, Ohio 43017; or call 1-800-325-FLEX, or
call (614) 766-7000.
Minimum purchase requirements for retirement plan accounts are subject
to the same requirements as regular accounts, except for an IRA, which has a
reduced minimum purchase requirement. (See "How to Buy Shares.")
- --------------------------------------------------------------------------------
OTHER SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
AUTOMATIC ACCOUNT BUILDER: Regular investments in any Fund of $100 or
more will be deducted from a shareholder's checking or savings account and
invested in shares of the Fund(s) selected. A shareholder's bank must be a
member of the Automated Clearing House (ACH). Shareholders wishing to add to
their investment account must complete the Automatic Account Builder section of
the New Account Application. There is no charge for this service.
SYSTEMATIC WITHDRAWAL PROGRAM: A Systematic Withdrawal Program is
offered for any investor who wishes to receive regular distributions from his
account. The investor must either own or purchase shares having a value of at
least $10,000 and advise the Trust in writing of the amount to be distributed
and the desired frequency, i.e., monthly, quarterly or annually. This option may
be exercised by completing the appropriate section of the New Account
Application. The investor should realize that if withdrawals exceed income
dividends, the invested principal may be depleted. The investor may make
additional investments and may change or stop the program at any time. There is
no charge for this program.
SUB-ACCOUNTING FOR INSTITUTIONAL INVESTORS: The Trust's optional
sub-accounting system offers a separate shareholder account for each participant
and a master account record for the institution. Share activity is thus recorded
and statements prepared for both individual sub-accounts and for the master
account. For more complete information concerning this program contact the
Trust.
22
<PAGE> 99
DISTRIBUTOR: Shares of the Funds are sold by the Trust itself in those
states where its shares have been registered for sale or a valid exemption
exists. States where registration or an exemption exists can be obtained by
calling 1-800-325-FLEX or (614) 766-7000.
- --------------------------------------------------------------------------------
SHAREHOLDER ACCOUNTS
- --------------------------------------------------------------------------------
The Trust maintains an account for each shareholder in full and
fractional shares. The Trust reserves the right to reject any purchase order,
and to waive minimum purchase requirements.
CONFIRMATION STATEMENTS--All purchase and sale transactions, and
dividend reinvestments, are confirmed promptly after they become effective.
ACCOUNTS BELOW MINIMUMS--The Trust reserves the right to redeem shares
in any account for their then current net asset value and pay the proceeds to
the shareholder if at any time the account has shares valued at less than $1,000
($500 for an IRA) as a result of redemptions by the shareholder. The Trust also
reserves the right to redeem the shares in any account which may have been
opened under a waiver of minimum purchase requirements if sufficient additional
shares were not subsequently purchased to meet these requirements. Before a
redemption is processed, the shareholder will be allowed 30 days after written
notice from the Trust to make an additional investment sufficient to bring the
value of shares in the account to $1,000 ($500 for an IRA).
23
<PAGE> 100
INVESTMENT ADVISER
R. Meeder & Associates, Inc.
ADDRESS OF FUND & ADVISER
6000 Memorial Drive
Dublin, OH 43017
800-325-FLEX
614-766-7000 (in Central Ohio)
CUSTODIAN
Star Bank, N.A.
Star Bank Center
425 Walnut Street
Cincinnati, OH 45202
TRANSFER AGENT & DIVIDEND
DISBURSING AGENT
Mutual Funds Service Co.
6000 Memorial Drive
Dublin, OH 43017
800-325-FLEX
614-766-7000 (in Central Ohio)
AUDITORS
KPMG Peat Marwick LLP
Two Nationwide Plaza
Columbus, OH 43215
TABLE OF CONTENTS
Page
Highlights..............................2
Synopsis of Financial Information.......3
Financial Highlights....................4
Performance Comparisons.................6
Investment Objective and Policies.......7
Additional Investment Policies..........8
The Trust and Its Management...........11
Distribution Plan......................13
Income Dividends and Taxes.............13
How Net Asset Value is Determined......15
Other Information......................15
How to Buy Shares......................17
How to Make Withdrawals (Redemptions)..19
Exchange Privilege.....................21
Flex-funds Retirement Plans............22
Other Shareholder Services.............22
Shareholder Accounts...................23
THE FLEX-FUNDS
THE MUIRFIELD FUND
PROSPECTUS
APRIL __,1996
prosmuir
<PAGE> 101
THE FLEX-FUNDS
CROSS REFERENCE SHEET TO FORM N-1A
FOR THE GROWTH FUND, THE MUIRFIELD FUND,
THE U.S. GOVERNMENT BOND FUND AND THE MONEY MARKET FUND
Part B.
Item No. Statement of Additional Information
- -------- -----------------------------------
10 Cover Page
11 Table of Contents
12 Investment Policies and Related Matters - General
13(a)(b)(c) Investment Policies and Related Matters
13(d) Not applicable
14(a)(b) Officers and Trustees
14(c) Not applicable
15(a) Not applicable
15(b)(c) Principal Holders of Outstanding Shares
16(a)(b) Investment Adviser and Manager
16(c) Not applicable
16(d) Other Services
16(e) Not applicable
16(f) Distribution Plans
16(g) Not applicable
16(h) Other Services
16(i) Other Services
17 Purchase and Sale of Portfolio Securities
18 Not applicable
19(a) Flex-funds Retirement Plans
19(b) Valuation of Portfolio Securities
20 Not applicable
21 Not applicable
22(a) Calculation of Yield - The Money Market Fund
22(b) Calculation of Yield - The Bond Fund
22(b) Calculation of Total Return
23 Financial Statements
<PAGE> 102
THE FLEX-FUNDS
6000 Memorial Drive
Dublin, Ohio 43017
Statement of Additional Information Dated April __, 1996
This Statement of Additional Information pertains to the following Funds of The
Flex-funds: The Growth Fund, The Muirfield Fund, The U.S. Government Bond Fund
and The Money Market Fund. This Statement of Additional Information is not a
prospectus. It should be read in conjunction with the Prospectus of The
Flex-funds dated April ___, 1996. A copy of the Prospectus may be obtained from
The Flex-funds, at the above address, or by calling: 1-800-325-FLEX, or (614)
766-7000. Capitalized terms used and not otherwise defined herein have the same
meanings as defined in the Prospectus.
TABLE OF CONTENTS
Page
----
Investment Policies and Related Matters 2
General.. 2
Defensive Investing 2
The Growth Stock Portfolio 4
The Mutual Fund Portfolio 5
The Money Market Portfolio 6
Money Market Instruments and Bonds 7
Ratings.. 9
Hedging Strategies 11
Investment Restrictions 14
Portfolio Turnover 16
Purchase and Sale of Portfolio Securities 17
Valuation of Portfolio Securities 18
Calculation of Yield - The Money Market Fund 19
Calculation of Total Return 19
Calculation of Yield - The U.S. Government
Bond Fund 21
Investment Adviser and Manager 22
Officers and Trustees 23
Distribution Plans 27
Flex-funds Retirement Plans 29
Other Services ... 30
Principal Holders of Outstanding Shares 30
Additional Information 31
Financial Statements 31
1
<PAGE> 103
INVESTMENT POLICIES AND RELATED MATTERS
GENERAL
As described in the Prospectus, the Trust seeks to achieve the
investment objective of each Fund by investing all of its investable assets in a
corresponding Portfolio having the same investment objective, policies and
restrictions as that Fund. Since the investment characteristics of the Funds
correspond directly to those of each Fund's respective Portfolio, the following
is a discussion of the various investments of and techniques employed by the
Portfolios.
The investment policies set forth below in this section represent the
Portfolios' policies as of the date of this Statement of Additional Information.
The investment policies are not fundamental and they may be changed by the
Trustees of the Portfolios without shareholder approval. (No such change would
be made, however, without 30 days' written notice to shareholders.)
The Manager of the Portfolios places a high degree of importance on
protecting portfolio values from severe market declines. Consequently, a
Portfolio's assets may at times be invested for defensive purposes in bonds and
money market instruments. (See "Defensive Investment Strategy" and "Money Market
Instruments and Bonds," below.)
Because the Manager intends to employ flexible defensive investment
strategies when market trends are not considered favorable, the Manager may
occasionally change the entire portfolio in any, or several, of the Portfolios.
High transaction costs could result when compared with other funds.
All Portfolios intend to comply with the short-term trading
restrictions of Subchapter M of the Internal Revenue Code of 1986, as amended,
although these restrictions could inhibit a rapid change in a Portfolio's
investments. All Portfolios will strive for a positive investment return each
calendar year.
The Trust's Bond Fund changed its name to The U.S. Government Bond Fund
on April 17, 1996.
DEFENSIVE INVESTMENT STRATEGY
The Flex-funds are asset allocation mutual funds. The Manager has been
involved in the application of tactical asset allocation with over 20 years
experience managing market risk in all stock and bond market conditions.
Studies have reviewed the importance of the asset allocation decision.
The Manager believes the choice of the correct asset class has often contributed
more to investment performance than the selection of a sector or individual
security. Yet the typical investor and mutual fund manager often focus instead
on an individual security or sector.
2
<PAGE> 104
Since 1974, the Manager's tactical asset allocation discipline, called
"Defensive Investing", has addressed the asset allocation decision by making
shifts in the mix of stocks, bonds and cash in a portfolio. "Defensive
Investing" is based on mathematical principles and historical precedent.
The Manager's tactical asset allocation discipline is based upon daily
monitoring of over 50 technical and fundamental market indicators. Among the
factors that the Manager monitors in an attempt to assess the current market
environment are the following:
- INDEX EVALUATION. The trend of stock market indexes and
comparative analysis of the various indexes to evaluate the
markets relative strengths and weaknesses.
- DIVERGENT MARKET ACTIVITY. Comparison of internal measurements of
the market to the trend of prices.
- MONETARY AND INTEREST RATE TRENDS. The trends of interest rates
and monetary conditions.
- INVESTOR SENTIMENT. The effect of current opinion on the market
environment.
- VOLUME RELATIONSHIP TO PRICE. Comparison of volume measurements to
price trends.
- EXTREME MARKET ACTIVITY. Short-term overbought or oversold
conditions.
The Manager maintains the flexibility to be fully invested in the stock
or bond markets during favorable market conditions.
The stock market has historically offered returns that have exceeded
those available from bonds or money market instruments. Through the Manager's
asset allocation process, it strives to protect shareholders during unfavorable,
high risk markets and participate in rising low risk markets.
Investors seeking a higher level of income than Treasury bills or money
market instruments have often invested in intermediate to long-term bonds. Bond
investors have historically been most vulnerable not to defaults on individual
bonds, but to changes in interest rates that drive bond prices up or down.
The Manager believes the appropriate way to defend assets against
shifts in interest rates is to be invested in long-term bonds only when the
trend of interest rates is stable or declining. To determine the bond market
environment, the Manager monitors the following technical indicators:
- MOMENTUM. The trend of bond prices versus various moving averages.
- REAL RATES. The 10-year treasury bond yield as compared to the
inflation rate.
- YIELD SPREAD. The 10-year treasury bond yield as compared to the
T-bill yield.
"Defensive Investing" examines and incorporates past market history in
order to learn something about the markets of the future.
3
<PAGE> 105
For example, the gains offered by the U.S. stock market during the
1980s were surpassed only by the returns available during the 1950s. Therefore,
the Manager believes that the stock market of the 1990s will look less like the
1980s and more like the historical average in terms of returns and volatility.
Further, there has never been a time when investors in U.S. bonds have
been rewarded as well as they were during the 1980s. The Manager believes
absolute returns for bond investors in the 1990s will decrease from the 1980s.
In order for the 1990s returns to approach those of the 1980s, long-term
interest rates would have to fall below 3%.
DECADES OF THE PAST
STOCKS BONDS
-------------------------------------------------
DOWN DOWN
DECADE RETURN YEARS RETURN YEARS
-------------------------------------------------------------------
1980s 405.5% 1 220.8% 1
1970s 77.4% 3 70.8% 3
1960s 111.9% 3 14.9% 3
1950s 488.0% 2 (1.0%) 2
1940s 141.1% 3 37.0% 3
1930s (1.0%) 6 61.3% 6
-------------------------------------------------------------------
Source: DeMarche Associates
The Flex-funds will strive to reduce or eliminate downside risk during
adverse stock, bond and foreign currency markets and to participate in positive
risk-reward market conditions, without excessive risk to principal.
THE GROWTH STOCK PORTFOLIO
The Growth Stock Portfolio will invest in two representative groups of
common stocks; one comprised of large capitalization stocks, the other of small
capitalization stocks. At times, the Portfolio may invest more heavily in one
group than in the other. For the purposes of this policy, "large capitalization"
stocks are defined as stocks of companies that rank in the top one-third of the
common stocks listed on the New York Stock Exchange ("N.Y.S.E."), based upon
their equity capitalization. The "small capitalization" group are defined as
stocks of companies that rank in the middle one-third of the common stocks
listed on the N.Y.S.E., based upon their equity capitalization. This group of
stocks would generally rank near or slightly below the average equity
capitalization of all common stocks listed on the N.Y.S.E.
Stocks may be deleted from either group in order to meet
diversification requirements or due to mergers, takeovers, or bankruptcies.
In seeking to attain the objective of the Growth Stock Portfolio, the
Manager will change its investments from common stocks to a defensive position
and back again to
4
<PAGE> 106
meet changing conditions in the stock market. Although earning current income
will not be an objective, some income may be realized from stocks, from
convertible securities, or, when the Portfolio takes a defensive position, from
debt instruments. The Portfolio will strive for a positive investment return
(a net gain of net asset value per share, including reinvestment of
distributions) each fiscal year.
The Growth Stock Portfolio's assets will be invested in stocks, except
when they are invested in bonds or money market instruments for defensive
purposes. The Portfolio will invest in common stocks when the Manager believes
the stock market environment is favorable. Assets will be invested in money
market instruments or bonds when the Manager believes a weak or declining trend
in the stock market is occurring. The Portfolio will not invest in bonds or
money market instruments except for defensive purposes, nor will it invest in
bonds for capital appreciation.
THE MUTUAL FUND PORTFOLIO
The Manager will select mutual funds for inclusion in the Mutual Fund
Portfolio on the basis of the industry classifications represented in their
portfolios, their specific portfolio holdings, their performance records, their
expense ratios, and the compatibility of their investment policies and
objectives with those of the Mutual Fund Portfolio.
The Manager utilizes an asset allocation system for deciding when to
invest in mutual funds or alternatively in temporary investments such as are
described below. The use of this system entails recurring changes from a fully
invested position to a fully defensive position and vice-versa.
(See "Additional Investment Policies" in the Trust's Prospectus.)
In purchasing shares of other mutual funds the Mutual Fund Portfolio
will agree to vote the shares in the same proportion as the vote of all other
holders of such shares.
The Mutual Fund Portfolio has adopted certain investment restrictions
which cannot be changed except with the vote of a majority of the Mutual Fund
Portfolio's outstanding shares. These restrictions are applicable to the Mutual
Fund Portfolio and are described elsewhere in this Statement of Additional
Information. Investment restrictions for the Mutual Fund Portfolio differ from
the restrictions applicable to the other Portfolios, in that the Mutual Fund
Portfolio is permitted to invest more than 5% of its assets in the securities of
any one issuer; is permitted to purchase the shares of other investment
companies (mutual funds); and may invest more than 25% of its assets in any one
industry.
The Mutual Fund Portfolio may only purchase up to 3% of the total
outstanding securities of any underlying mutual fund. The holdings of any
"affiliated persons" of the Trust and the Portfolios, as defined in the
Investment Company Act, must be included in the computation of the 3%
limitation. Accordingly, when "affiliated persons" hold shares of an underlying
mutual fund, the Mutual Fund Portfolio will be limited in its ability to fully
invest in that mutual fund. The Manager may then, in some instances, select
alternative investments.
5
<PAGE> 107
The Investment Company Act also provides that an underlying mutual fund
whose shares are purchased by the Mutual Fund Portfolio may be allowed to delay
redemption of its shares in an amount which exceeds 1% of its total outstanding
securities during any period of less than 30 days. Shares held by the Mutual
Fund Portfolio in excess of 1% of a mutual fund's outstanding securities
therefore may not be considered readily disposable securities.
Under certain circumstances, an underlying mutual fund may determine to
make payment of a redemption by the Mutual Fund Portfolio wholly or partly by a
distribution in kind of securities from its portfolio, in lieu of cash, in
conformity with rules of the Securities and Exchange Commission. In such cases,
the Mutual Fund Portfolio may hold securities distributed by an underlying
mutual fund until the Manager determines that it is appropriate to dispose of
such securities.
Portfolio investment decisions by an underlying mutual fund will be
made independent of investment decisions by other underlying mutual funds.
Therefore, an underlying mutual fund may be purchasing shares of a company whose
shares are simultaneously being sold by some other underlying mutual fund. The
result of this would be an indirect transaction expense (principally
commissions) for the Mutual Fund Portfolio, without its having changed its
investment position.
The Mutual Fund Portfolio may invest in common stocks based upon the
criteria described in its investment objectives. Because the Mutual Fund
Portfolio will only invest directly in common stocks to replicate the
performance of popular stock market indices the selection of stocks would be
limited to those stocks found in a particular index. Generally, investments in
common stocks will not exceed 25% of the Portfolio's net assets.
For temporary defensive purposes, the Mutual Fund Portfolio may invest
in (or enter into repurchase agreements with banks and broker-dealers with
respect to) corporate bonds, U.S. Government securities, commercial paper,
certificates of deposit or other money market instruments. The Mutual Fund
Portfolio may engage in hedging transactions to the extent and for the purposes
set forth in the Trust's Prospectus.
THE MONEY MARKET PORTFOLIO
The Money Market Portfolio seeks to maintain a constant net asset value
of $1.00 per share, although there is no assurance it will be able to do so. To
do so, the Portfolio utilizes the amortized cost method of valuing its portfolio
securities pursuant to a rule adopted by the Securities and Exchange Commission.
The rule also prescribes portfolio quality and maturity standards. The Portfolio
will be managed in accordance with the requirements of this rule.
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MONEY MARKET INSTRUMENTS AND BONDS
THE GROWTH STOCK, MUTUAL FUND AND MONEY MARKET PORFOLIOS
When investing in money market instruments or bonds, the Growth Stock,
Mutual Fund and Money Market Portfolios will limit their purchases, denominated
in U.S. dollars, to the following securities:
* U.S. Government Securities and Securities of its Agencies and
Instrumentalities obligations issued or guaranteed as to
principal or interest by the United States or its agencies
(such as the Export Import Bank of the United States, Federal
Housing Administration, and Government National Mortgage
Association) or its instrumentalities (such as the Federal
Home Loan Bank, Federal Intermediate Credit Banks and Federal
Land Bank), including Treasury bills, notes and bonds.
* Bank Obligations and Instruments Secured Thereby - Bank
obligations and instruments secured thereby are obligations
including certificates of deposit, time deposits and bankers'
acceptances) of domestic banks having total assets of
$1,000,000,000 or more, instruments secured by such
obligations and obligations of foreign branches of such banks,
if the domestic parent bank is unconditionally liable to make
payment on the instrument if the foreign branch fails to make
payment for any reason. A Portfolio may also invest in
obligations (including certificates of deposit and bankers'
acceptances) of domestic branches of foreign banks having
assets of $1,000,000,000 or more, if the domestic branch is
subject to the same regulation as United States banks. A
Portfolio will not invest at time of purchase more than 25% of
its assets in obligations of banks, nor will a Portfolio
invest more than 10% of its assets in time deposits.
* High Quality Commercial Paper - The Growth Stock and Mutual
Fund Portfolios may invest in commercial paper rated no lower
than "A-2" by Standard & Poor's Corporation or "Prime-2" by
Moody's Investors Services, Inc., or, if not rated, issued by
a company having an outstanding debt issue rated at least A by
Standard & Poor's or Moody's.
* High Quality Commercial Paper - The Money Market Portfolio,
which is subject to specific quality criteria and
diversification requirements, may invest in commercial paper
rated in either one of the two highest categories by at least
two nationally recognized rating services, or, if not rated,
guaranteed by a company having commercial paper rated in
either one of the two highest categories by at least two
nationally recognized rating services. See The Money Market
Portfolio above.
* Private Placement Commercial Paper - Private placement
commercial paper ("Rule 144A securities") consists of
unregistered securities which are traded in public markets to
qualified institutional investors, such as The
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Growth Stock and Mutual Fund Portfolios. A Portfolio's risk is
that the universe of potential buyers for the securities,
should the Portfolio desire to liquidate a position, is
limited to qualified dealers and institutions, and therefore
such securities could have the effect of being illiquid.
* High Grade Corporate Obligations - Each of these three
Portfolios may invest in high grade corporate obligations.
High grade corporate obligations are obligations rated at
least A by Standard & Poor's or Moody's. See rating
information below.
* Repurchase Agreements Pertaining to the Above - Each of these
three Portfolios may invest without limit in any of the above
securities subject to repurchase agreements with any Federal
Reserve reporting dealer or member bank of the Federal Reserve
System.
A repurchase agreement is an instrument under which the
purchaser (i.e., a Portfolio) acquires ownership of a debt
security and the seller agrees, at the time of the sale, to
purchase the obligation at a mutually agreed upon time and
price, thereby determining the yield during the purchaser's
holding period. This results in a fixed rate of return
insulated from market fluctuations during such period. The
underlying securities could be any of those described above,
some of which might bear maturities exceeding one year. A
Portfolio's risk is that the seller may fail to repurchase the
security on the delivery date. If the seller defaults, the
underlying security constitutes collateral for the seller's
obligation to pay. It is a policy of each Portfolio to make
settlement on repurchase agreements only upon proper delivery
of the underlying collateral. Repurchase agreements usually
are for short periods, such as one week or less, but could be
longer. A Portfolio may enter into repurchase agreements with
its custodian (Star Bank, N.A., Cincinnati) when it is
advantageous to do so. No Portfolio will invest more than 10%
of its assets, at time of purchase, in repurchase agreements
which mature in excess of seven days.
THE BOND PORTFOLIO
When investing in money market instruments, The Bond Portfolio will
limit its purchases, denominated in U.S. dollars, to securities which are
issued, or guaranteed as to payment of principal and interest, by the U.S.
government or any of its agencies or instrumentalities, and repurchase
agreements relating thereto. Unlike the other Portfolios, The Bond Portfolio
(whether invested defensively or otherwise) may not invest in bank obligations
and instruments secured thereby, high quality commercial paper, private
placement commercial paper or corporate obligations. The provisions
relating to repurchase agreements in the immediately preceding paragraph also
apply to The Bond Portfolio's investment in repurchase agreements.
The Manager exercises due care in the selection of money market
instruments and bonds. However, there is a risk that the issuers of the
securities may not be able to meet
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their obligations to pay interest or principal when due. There is also a risk
that some of a Portfolio's securities might have to be liquidated prior to
maturity at a price less than original amortized cost or value, face amount or
maturity value to meet larger than expected redemptions. Any of these risks, if
encountered, could cause a reduction in net income or in the net asset value of
a particular Portfolio.
RATINGS
1. Moody's Investors Services, Inc.'s Corporate Bond Rating:
Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins or
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa - Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length or time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
2. Standard and Poor's Corporation's Corporate Bond Rating:
AAA - Bonds rated AAA are highest grade obligations. They possess the
ultimate degree of protection as to principal and interest. Marketwise they move
with interest rates, and hence provide the maximum safety on all counts.
AA - Bonds rated AA also qualify as high grade obligations, and in the
majority of instances differ from AAA issues only in small degree. Here, too,
prices move with the long-term money market.
A - Bonds rated A are regarded as upper medium grade. They have
considerable investment strength but are not entirely free from adverse effect
of changes in economic
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and trade conditions. Interest and principal are regarded as safe. They
predominantly reflect money rates in their market behavior but, to some extent,
also economic conditions.
BBB - Bonds rated BBB are regarded as having an adequate capacity to
pay principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the A category.
3. A-1 and P-1 Commercial Paper Ratings:
Commercial paper rated A-1 by Standard & Poor's Corporation ("S&P") has
the following characteristics: Liquidity ratios are adequate to meet cash
requirements. Long term senior debt is rated "A" or better. The issuer has
access to at least two additional channels of borrowing. Basic earnings and cash
flow have an upward trend. Typically, the issuer's industry is well established
and the issuer has a strong position within the industry. The reliability and
quality of management are unquestioned. Relative strength or weakness of the
above factors determines whether the issuer's commercial paper is A-1, A-2, or
A-3.
The rating P-1 is the highest commercial paper rating assigned by
Moody's Investors Service, Inc. ("Moody's"). Among the factors considered by
Moody's in assigning ratings are the following: (1) evaluation of the management
of the issuer; (2) economic evaluation of the issuer's industry or industries
and an appraisal of speculative-type risks which may be inherent in certain
areas; (3) evaluation of the issuer's products in relation to competition and
customer acceptance; (4) liquidity; (5) amount and quality of long-term debt;
(6) trend of earnings over a period of ten years; (7) financial strength of a
parent company and the relationships which exist with the issuer; and (8)
recognition by the management of obligations which may be present or may arise
as a result of public interest questions and preparations to meet such
obligations.
4. Description of Permitted Money Market Investments:
Commercial Paper - refers to promissory notes issued by corporations in
order to finance their short term credit needs.
U.S. Government Obligations - are bills, certificates of indebtedness,
notes and bonds issued by the U.S. Treasury and agencies, authorities and
instrumentalities of the U.S. Government established under the authority of an
act of Congress. Some obligations of U.S. Government agencies, authorities and
instrumentalities are supported by the full faith and credit of the U.S.
Treasury, as for example, the Government National Mortgage Association; others
by the right of the issuer to borrow from the Treasury, as in the case of
Federal Farm Credit Banks and Federal National Mortgage Association; and others
only by the credit of the agency, authority or instrumentality; as for example,
Federal Home Loan Mortgage and Federal Home Loan Bank.
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Repurchase Agreements - A repurchase transaction occurs when an
investor buys a security and simultaneously agrees to resell it at a later date
to the person from whom it was bought, at a higher price. The price differential
represents interest for the period the security is held. Repurchase transactions
will normally be entered into with banks and securities brokers. A Portfolio
could suffer a loss if the bank or securities broker with which the Portfolio
had a repurchase agreement were to default.
Certificates of Deposit - are certificates issued against funds
deposited in a bank, are for a definite period of time, earn a specified or
variable rate of return and are normally negotiable.
Banker's Acceptances - are short-term credit instruments used to
finance the import, export, transfer or storage of goods. They are termed
"accepted" when a bank guarantees their payment at maturity.
Corporate Obligations - include bonds and notes issued by corporations
in order to finance longer term credit needs.
HEDGING STRATEGIES
The Investment Adviser may conduct a hedging program on behalf of a
Portfolio for any of the reasons described in the Prospectus. Such a program
would involve entering into options, futures or forward contracts (hedge
transactions).
Derivatives are financial instruments whose performance is derived, at
least in part, from the performance of an underlying asset, security or index.
Financial futures contracts or related options used by a Portfolio to implement
its hedging strategies are considered derivatives. The value of derivatives can
be affected significantly by even small market movements, sometimes in
unpredictable ways. They do not necessarily increase risk, and may in fact
reduce risk.
The objective of an option, futures or forward contract transaction
could be to protect a profit or offset a loss in a Portfolio from future price
erosion. Or, the objective could be to acquire the right to purchase a fixed
amount of securities or currency at a future date for a definite price. In
either case, it would not be necessary for a Portfolio to actually buy or sell
the securities or currency currently. Instead, the hedge transaction would give
the Portfolio the right at a future date to sell, or in other instances buy, the
particular securities or currency under consideration or similar securities. The
value of shares of common stock, the face amount of currency or the face amount
of government bonds or notes covered by the hedge transaction would be the same,
or approximately the same, as the quantity held by the Portfolio or the quantity
under consideration for purchase.
In lieu of the sale of a security or currency, an option transaction
could involve the purchase of a put option contract, which would give a
Portfolio the right to sell a common stock, government bond, currency or futures
contract on an index (see below), at a specified price until the expiration date
of the option. A Portfolio will only purchase a put
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option contract on a stock, currency or bond when the number of shares of the
issuer's stock, face amount of currency or the face amount of government bonds
involved in the option transaction are equal to those owned by the Portfolio.
Limitations on the use of put option contracts on an index are described below.
Also, in lieu of the sale of securities or currency, a futures
transaction could involve the sale of a futures contract which would require a
Portfolio either (a) to deliver to the other party to the contract the
securities specified and receive payment at the price contracted for, prior to
the expiration date of the contract, or (b) to make or entitle it to receive
payments representing (respectively) the loss or gain on the currency, security
or securities involved in the futures contract.
Also, in lieu of the sale of a currency, a forward contract could
involve the sale of a currency for future delivery. A forward contract will
specify a specific price and a specific date for the transaction to occur. A
forward contract will only be entered into for specific amounts of currency
which match the amount of foreign currency which the Portfolio will possess on
the delivery date. Entering into a forward contract will reduce the affect on
net asset values of currency exchange rates on the portion of the currency which
is sold.
The securities involved in an option or futures contract may be
currency, stocks or government bonds, or a group of stocks represented by a
popular stock market index, and they need not be exactly the same as those owned
by a Portfolio. The Investment Adviser will select the futures contract which
involves a security, group of securities, or index which it feels is closest to
a mirror image of the investments held by the Portfolio. However, the securities
involved in the contract need not be exactly the same as those owned by a
Portfolio, and this may entail additional risk, as described below.
To the extent that a Portfolio enters into futures contracts which sell
an index or group of securities short and which therefore could require the
Portfolio to pay the other party to the contract a sum of money measured by any
increase in a market index, the Portfolio will be exposing itself to an
indeterminate liability. On the other hand, a Portfolio should increase or
decrease in value to approximately the same extent as the market index or group
of securities, so any loss incurred on the contract should be approximately
offset by unrealized gains in Portfolio positions. Such an outcome is not
guaranteed, and it would be possible for the value of the index and the
Portfolio to move in opposite directions, in which case the Portfolio would
realize an unexpected gain or loss.
A Portfolio will only sell an index short when the Investment Adviser
has decided to reduce a Portfolio's risk for defensive purposes, and will close
out the open liability as soon as the Investment Adviser decides that a
defensive posture is no longer appropriate or the open liability represents an
inappropriate risk in the circumstances. In shorting an index, a Portfolio will
segregate assets to the full value of the contract and maintain and supplement
such segregation to the extent necessary until the short position is eliminated.
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In lieu of the purchase of a security or currency, an option
transaction could involve the purchase of a call option which would give the
Portfolio the right to buy a specified security (common stock or government
bonds) or currency or index aggregate at a specified price until the expiration
date of the option contract. Sufficient cash or money market instruments will be
segregated and maintained in reserve to complete the purchase. The Portfolio
will only purchase call options when the shares of stock or face amount of
currency or face amount of bonds or value of the index aggregate included in the
option are equal to those planned to be purchased by the Portfolio.
In lieu of the purchase of securities or currency, a futures
transaction could involve the purchase of a futures contract which would either
(a) require the Portfolio to receive and pay for the securities or currency
specified in the futures contract at the price contracted for prior to the
expiration date of the contract or (b) require the Portfolio to make payment or
receive payment representing (respectively) the loss or gain on the currency,
security or securities involved in the contract. The securities may be
government bonds, stocks, or a group of stocks such as a popular stock market
index, and need not be exactly the same as those intended to be purchased by the
Portfolio. The Investment Adviser will select the contract (therefore the group
of securities) which it believes is most similar to those desired to be
purchased by the Portfolio.
Also, in lieu of the purchase of a currency, a forward contract could
involve the purchase of a currency for future delivery. A forward contract will
specify a specific price and a specific date for the transaction to occur. A
forward contract will only be entered into for specific amounts of currency
which match the amount of foreign currency which the Portfolio will need to
possess on the delivery date. Entering into a forward contract for the purchase
of a foreign currency will cause the fluctuations of currency exchange rates to
affect the net asset value for the portion of the currency which is purchased.
A Portfolio may sell any put or call option contracts it enters into.
Such a transaction would normally be used to eliminate or close out a hedged
position. A Portfolio may also buy or sell futures contracts to eliminate or
close out a hedged position.
Option contracts will be purchased through organized exchanges and will
be limited to those contracts which are cleared through the Options Clearing
Corporation. Organized exchanges which presently trade option contracts are the
Chicago Board Options Exchange, the American Stock Exchange, the Philadelphia
Stock Exchange, the Pacific Stock Exchange, and the New York Stock Exchange.
Futures contracts will only be entered into through an organized
exchange. The exchanges which presently trade financial futures contracts are
the New York Futures Exchange, the Chicago Mercantile Exchange, the Chicago
Board of Trade, the Kansas City Board of Trade, and the International Monetary
Market (at the Chicago Mercantile Exchange).
Forward contracts for foreign currency will only be entered into with
security brokers which are also primary dealers for U.S. Government securities
as recognized by
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the U.S. Federal Reserve Banks or U.S. banks which are members of the Federal
Reserve System.
Put and call options and financial futures contracts are valued on the
basis of the daily settlement price or last sale on the exchanges where they
trade. If an exchange is not open, or if there is no sale, the contract is
valued at its last bid quotation unless the Trustees determine that such is not
a fair value. Forward contracts are valued based upon currency dealer quotations
for reversing the position. In the case of a futures contract which entails a
potential liability for a gain in a market index, the liability is valued at the
last sale of an offsetting contract or if there was no sale, at the last asked
quotation unless the Trustees determine that such does not fully reflect the
liability.
In conducting a hedging program for the Portfolios, the Investment
Adviser may occasionally buy a call on an index or futures contract and
simultaneously sell a put on the same index or futures contract. Or, in other
circumstances, it may sell a call and simultaneously buy a put on the same index
or futures contract.
When conducting a hedging program on behalf of a Portfolio, the
Portfolio will establish and maintain with the Custodian segregated accounts for
the deposit and maintenance of margin requirements. Such deposits will be in the
form of cash or U.S. Government securities in amounts as shall be required from
time to time by the broker or the exchange on which the transactions are
effected for the Portfolio.
INVESTMENT RESTRICTIONS
The investment restrictions below have been adopted by the Trust with
respect to each of the Funds and by the Portfolios as fundamental policies.
Under the Investment Company Act of 1940 (the "Act"), a "fundamental" policy may
not be changed without the vote of a majority of the outstanding voting
securities of the Fund or Portfolio, respectively, to which it relates, which is
defined in the Act as the lesser of (a) 67 percent or more of the shares present
at a shareholder meeting if the holders of more than 50 percent of the
outstanding shares are present or represented by proxy, or (b) more than 50
percent of the outstanding shares ("Majority Vote"). The percentage limitations
contained in the restrictions listed below apply at the time of the purchase of
the securities. Whenever a Fund is requested to vote on a change in the
investment restrictions of a Portfolio, the Trust will hold a meeting of Fund
shareholders and will cast its votes as instructed by the shareholders.
Provided that nothing in the following investment restrictions shall
prevent the Trust from investing all or part of a Fund's assets in an open-end
management investment company with the same investment objective or objectives
as such Fund, no Fund or Portfolio may: (a) Issue senior securities; (b) Borrow
money except as a temporary measure, and then only in an amount not to exceed 5%
of the value of its net assets (whichever is less) taken at the time the loan is
made, or pledge its assets taken at value to any extent greater than 15% of its
gross assets taken at cost; (c) Act as underwriter of securities of other
issuers; (d) Invest in real estate except for office purposes; (e) Purchase or
sell commodities or commodity contracts, except that it may purchase or sell
financial
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futures contracts involving U.S. Treasury Securities, corporate securities, or
financial indexes; (f) Lend its funds or other assets to any other person;
however, the purchase of a portion of publicly distributed bonds, debentures or
other debt instruments, the purchase of certificates of deposit, U.S. Treasury
Debt Securities, and the making of repurchase agreements are permitted (except
in the case of The Bond Portfolio which is not permitted to purchase corporate
bonds, debentures or other corporate debt instruments; and certificates of
deposit), provided repurchase agreements with fixed maturities in excess of 7
days do not exceed 10% of its total assets; (g) Purchase more than 10% of any
class of securities, including voting securities of any issuer, except that the
purchase of U.S. Treasury debt instruments shall not be subject to this
limitation; (h) Invest more than 5% of its total assets (taken at value) in the
securities of any one issuer, other than obligations of the U.S. Treasury;
provided, however, that this restriction shall not be applicable to any separate
investment series of the Trust or a Portfolio which is created specifically to
invest in the shares of other investment companies; (i) Purchase any securities
on margin, or participate in any joint or joint and several trading account,
provided, however, that it may open a margin account to the extent necessary to
engage in hedging transactions which are not precluded by other particular
restrictions; (j) Make any so-called "short" sales of securities, except against
an identical portfolio position (i.e., a "short sale against the box"), but this
restriction shall not preclude a futures contract which sells short an index or
group of securities; (k) Invest more than 25% of its net assets at time of
purchase (taken at value) in the securities of companies in any one industry;
provided, however, that this restriction shall not be applicable to any separate
investment series of the Trust or a Portfolio which is created specifically to
invest in the shares of other investment companies; (l) Purchase the securities
of another investment company except where such purchase is part of a plan of
merger or consolidation; provided, however, that this restriction shall not be
applicable to any separate investment series of the Trust or a Portfolio which
is created specifically to invest in the shares of other investment companies;
(m) Purchase or retain any securities of an issuer, any of whose officers,
directors or security holders is an officer or director of the Trust or a
Portfolio, if such officer or director owns beneficially more than 1/2 of 1% of
the issuer's securities or together they own beneficially more than 5% of such
securities; (n) Invest in securities of companies which have a record of less
than three years' continuous operation if, at the time of such purchase, more
than 5% of its assets (taken at value) would be so invested; (o) Purchase
participations or other direct interests in oil, gas or other mineral
exploration or development programs; (p) Invest in warrants; and (q) Invest more
than 10% of its assets in restricted securities and securities for which market
quotations are not readily available and repurchase agreements which mature in
excess of seven days; however, this shall not prohibit the purchase of money
market instruments or other securities which are not precluded by other
particular restrictions.
In order to comply with certain state investment restrictions, each of
the Trust's and the Portfolios' operating policy is not to: (a) Notwithstanding
(b) above, pledge assets having a value in excess of 10% of its gross assets;
(b) Invest in oil, gas or mineral leases or programs; and (c) Purchase real
estate limited partnerships.
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PORTFOLIO TURNOVER
The portfolio turnover rate for the fiscal year ended December 31,
1995, in the Growth Stock Portfolio was 338% (1994 - 103%); in the Mutual Fund
Portfolio was 186% (1994 - 168%); and in the Bond Portfolio was 232% (1994 -
708%). Resultant turnover rates are primarily a function of the Manager's
response to market conditions. In the Manager's opinion, it was in the best
interest of Growth Stock, Mutual Fund and Bond Portfolios to change their
portfolios from a fully invested position to a partially defensive position at
various times during the year. This defensive investment strategy can produce
high portfolio turnover ratios when calculated in accordance with SEC rules.
THE MUTUAL FUND AND GROWTH STOCK PORTFOLIOS. The Portfolios began the
year with 100% of each portfolio invested in money market instruments and became
fully exposed to the stock market in late January. By mid-March the Portfolios
in response to internal weaknesses which were not confirming the price movement
of the Dow, adopted a partially defensive position by scaling back exposure to
the stock market to approximately 50%. In early May as negative divergences no
longer existed between the major stock market indexes the Portfolios were
returned to a fully invested position where they remained until the fourth
quarter. In October, certain technical and fundamental questions about the
market's continued advance began to indicate that the most prudent posture was
to again adopt a partially defensive position. The Portfolios remained partially
defensive until the first week in December when a fully invested position was
implemented and maintained through the end of the year.
THE BOND PORTFOLIO. The Portfolio began the year in a fully defensive
position with 100% of its investments being in money market instruments. By the
end of January the Portfolio was 100% invested in ten-year U.S. Treasuries.
Based on concerns that inflation was on the rise exposure was reduced to 80%
during the first week of February until late May when a 100% invested position
was re-employed. The bond market was very volatile during the third quarter
which necessitated development of a 50% defensive posture during the later part
of July. By late August, the level of risk in the bond market had subsided and
the Portfolio returned to a fully invested position in ten-year U.S. Treasuries
where it remained throughout the remainder of the year.
Two of the Portfolios have an investment objective of long term growth
of capital. Major changes in their portfolios have resulted in portfolio
turnover rates of as much as 338%, which is greater than that of most other
investment companies, including many which emphasize capital appreciation as a
basic policy. The policies of the Growth Stock Portfolio may be expected to
result in correspondingly heavier brokerage commissions and taxes, which
ultimately must be borne by the Trust's shareholders.
Management is presently unable to predict the portfolio turnover rate
for the current year in any of the Portfolios, as any major change in investment
posture to a defensive position, or vice versa, will result in a portfolio
turnover of 100% or more. It is conceivable that the turnover rate for one or
more of the Portfolios will exceed 300% in the current year.
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PURCHASE AND SALE OF PORTFOLIO SECURITIES
Each Portfolio seeks to obtain the best available prices on, and firm
execution of, all purchases and sales of portfolio securities. In order to do
so, it may buy securities from or sell securities to broker/dealers acting as
principals and may use primary markets in the purchase or sale of
over-the-counter securities, unless best price and execution can be obtained in
some other way.
Satisfied that it is obtaining the best available price and favorable
execution, a Portfolio may, from time to time, place orders for the purchase or
sale of portfolio securities with broker/dealers who provide research,
statistical or other financial information or services ("research") to it or to
R. Meeder & Associates, Inc. ("RMA"), or to any other client for which RMA acts
as investment adviser. The reasonableness of brokerage commissions paid by a
Portfolio in relation to transaction and research services received is evaluated
by the staff of RMA on an ongoing basis. The general level of brokerage charges
and other aspects of each Portfolio's portfolio transactions are reviewed
periodically by its Board of Trustees.
RMA is the principal source of information and advice to each Portfolio
and is responsible for making and initiating the execution of investment
decisions for each Portfolio. However, it is recognized by the Trustees that it
is important for RMA, in performing its responsibilities to each Portfolio, to
continue to receive and evaluate the broad spectrum of economic and financial
information which many securities brokers have customarily furnished in
connection with brokerage transactions and that, in compensating brokers for
their services, it is in the interest of each Portfolio to take into account the
value of the information received for use in advising each Portfolio. The
extent, if any, to which the obtaining of such information may reduce the
expenses of RMA in providing management services to each Portfolio is not
determinable. In addition, it is understood by the Trustees that other clients
of RMA might also benefit from the information obtained for a Portfolio, in the
same manner that a Portfolio might also benefit from information obtained by RMA
in performing services to others.
RMA utilizes brokers who have demonstrated an ability to execute orders
on a favorable basis, or who are able to provide research or other services. RMA
does not knowingly authorize a higher rate of commission to one broker than to
any other. In order to assure itself that a Portfolio is paying reasonable
commissions, RMA will periodically attempt to determine the rates being paid by
other institutional investors of similar size.
Currently, RMA negotiates for commissions equal to no more than 20
basis points (1/5 of 1%) and is generally able to hold commissions at or below
that level. For the fiscal year ended December 31, 1995, this approach resulted
in an average commission of 8.1 cents per share on portfolio purchases and
sales. Debt securities are purchased on a net basis.
RMA and the Trust have previously purchased various research and other
services with brokerage commissions paid to or for the benefit of certain
entities, whose service,
17
<PAGE> 119
annual fees and charges for the year ended December 31, 1995 were as follows:
(1) Standard & Poors Securities, Inc., fixed income research, $6,163 per year,
$2,805 paid in 1995. (2) The Clifton Group, equity and fixed income research and
trading $20,123 per year, $20,123 paid in 1995. (3) Yanni Bilkey, fixed income
research, $7,500 per year, $3,750 paid in 1995. (4) Wellington & Co.,
miscellaneous research services and reports, $10,652 per year, $10,652 paid in
1995. (5) Merrill Lynch Capital Markets, miscellaneous research services and
reports, $9,389 per year, $9,389 paid in 1995. (6) Bloomberg Financial, equity
and fixed income research, $20,298 per year, $20,298 paid in 1995. (7) Moody's
Investor Services, fixed income research, $12,290 per year, $12,290 paid in
1995. (8) Commodity Quote Graphics, equity and fixed income research, $14,640
per year, $14,640 paid in 1995. These entities receive payments through
Wellington and Company and The Citation Group which received $1.75 and $1.70
respectively for each $1 paid. The fees listed above include those paid by both
RMA and the Trust. Total commissions paid by the Trust to Wellington and Company
and The Citation Group amounted to $1,656 and $15,993, respectively.
It is the opinion of the Trust, the Portfolios and RMA that the receipt
of research from brokers will not materially reduce RMA's own research
activities or the overall cost of fulfilling its contracts with the Trust or the
Portfolios. Neither the Trust nor the Portfolios have any broker/dealer
affiliate.
During the year ended December 31, 1995, the Growth Stock Portfolio
paid total commissions of $44,665 ($135,422 in 1994; $99,419 in 1993) on the
purchase and sale of common stocks. Brokerage commissions paid on the purchase
and sales of futures and option contracts for the year ending December 31, 1995
were as follows: $22,399 in the Growth Stock Portfolio; $10,398 in the Bond
Portfolio; and $30,008 in the Mutual Fund Portfolio.
VALUATION OF PORTFOLIO SECURITIES
Except for securities owned by The Money Market Portfolio, securities
owned by a Portfolio and listed or traded on any national securities exchange
are valued at each closing of the New York Stock Exchange on the basis of the
last sale on such exchange each day that the exchange is open for business. If
there is no sale on that day, or if the security is not listed, it is valued at
its last bid quotation on the exchange or, in the case of unlisted securities,
as obtained from an established market maker. Futures contracts are valued on
the basis of the cost of closing out the liability; i.e., at the settlement
price of a closing contract or at the asked quotation for such a contract if
there is no sale. The Money Market Portfolio will value its securities by the
amortized cost method as it maintains a dollar weighted average portfolio
maturity of 90 days or less. Money market instruments (certificates of deposit,
commercial paper, etc.) in the other Portfolios, having maturities of 60 days or
less, are valued at amortized cost if not materially different from market
value. Portfolio securities for which market quotations are not readily
available are to be valued by the Manager in good faith at its own expense under
the direction of the Trustees. In The Bond Portfolio, securities are valued each
day at 3:00 p.m.
18
<PAGE> 120
Other assets, which include cash, prepaid and accrued items and amounts
receivable as income on investments and from the sale of portfolio securities,
are carried at book value, as are all liabilities. Liabilities include accrued
expenses, sums owed for securities purchased, and dividends payable.
CALCULATION OF YIELD - THE MONEY MARKET FUND
The Money Market Fund calculates its yield quotations based on the net
change, exclusive of realized and unrealized gains or losses, in the value of a
hypothetical account over a seven calendar day base period. The following is an
example of the yield calculations for the seven days ended December 31, 1995.
<TABLE>
Simple yield:
<S> <C>
Value of hypothetical account at end of period $1.00104455
Value of hypothetical account at beginning of
period 1.00000000
-----------
Base period return $ .00104455
===========
Current seven day yield (.00104455 x (365/7) 5.45%
Effective yield:
Effective yield [(.00104455 + 1)365/7 ] - 1 5.59%
</TABLE>
These yields reflect the Manager's decision to voluntarily waive a
portion of its management fee. Therefore, the Fund realized a higher yield as a
result of reduced expenses. Investors should recognize that yields are not
necessarily representative of future results, but will vary as a function of
market conditions and expenses incurred.
The Manager presently intends to waive a portion of its management fee
in the Money Market Portfolio to the extent necessary to achieve for The Money
Market Fund a compound annualized yield that will rank within the top 10% of
yields for all general purpose money market funds in 1996. There is no guarantee
that waiver of fees alone will accomplish this objective. The Manager may change
this policy at any time without notice to shareholders. This would, in some
circumstances, have an adverse effect on the net income of the Fund, and the
yields earned by shareholders. For planning purposes prospective investors and
shareholders should assume that expenses will be based on the maximum fee. (See
"Synopsis of Financial Information" in the Trust's Prospectus.)
CALCULATION OF TOTAL RETURN
From time to time The Growth, Muirfield and U.S. Government Bond Funds
may advertise their average annual total returns for various periods of time.
When applicable, depending on the Fund, the periods of time shown will be for a
one-year period; a five-
19
<PAGE> 121
year period; a ten-year period (or relevant portion thereof) and since
inception. The calculation assumes the reinvestment of all dividends and
distributions. Below is an example of the total return calculation for The
Muirfield Fund assuming a hypothetical investment of $1,000 at the beginning of
each period.
It is computed by finding the average annual compounded rates of return
over the length of the base periods that would equate the initial amount
invested to the ending redeemable value, according to the following formula:
P (1+T)n = ERV
P = initial investment of $1,000
T = average annual total return
n = Number of years
ERV = ending redeemable value at the
end of the base period
THE MUIRFIELD FUND:
<TABLE>
<CAPTION>
Total Return
-------------------------------------------------------------------------
1 Year 5 Years 7.4 Years
Period Ended Period Ended Period Ended
December 31, 1995 December 31, 1995 December 31, 1995
----------------- ----------------- -----------------
<S> <C> <C> <C>
Value of Account
At end of Period $1,258.20 $1,938.12 $2,403.33
Value of Account
At beginning of Period 1,000.00 1,000.00 1,000.00
--------- --------- ---------
Base Period Return $ 258.20 $ 938.12 $1,403.33
Average Total Return 25.82% 14.15% 12.58%
</TABLE>
Values were computed according to the following formulas:
<TABLE>
<S> <C>
1 Year: $1,000 (1 + .2582) = $1,258.20
5 Years: $1,000 (1 + .1415)5 = $1,938.12
7.4 Years: $1,000 (1 + .1258)7.4 = $2,403.33
</TABLE>
The Total Return performance data in this hypothetical example represents past
performance and the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost.
20
<PAGE> 122
Total Return quotations, when advertised for The Growth, Bond and Short-Term
Global Income Funds, are calculated in the same manner as described above.
CALCULATION OF YIELD - THE U.S. GOVERNMENT BOND FUND
From time to time The U.S. Government Bond Fund may advertise its
thirty-day yield quotation. It is computed by dividing the net investment income
per accumulation unit earned during the period by the maximum offering price per
unit on the last day of the period, according to the following formula:
YIELD = 2 [(a - b + 1)6 - 1]
-----
cd
a = income earned during the period
b = expense accrued for the period
c = average number of shares outstanding during the period
d = offering price per share on the last day of the period
Below is an example of calculation of The U.S. Government Bond Fund's yield for
the thirty days ended December 31, 1995:
<TABLE>
<S> <C>
4.82% = 2 [($ 77,026 - $13,092 +1)6 - 1]
------------------
745,293 x 21.58
</TABLE>
Quotations of yield for The U.S. Government Bond Fund will be
accompanied by total return calculations current to the most recent calendar
quarter. Total return will be calculated in the manner described above (See
"Calculation of Total Return"). Below is an example of the total return
calculation for The U.S. Government Bond Fund assuming a hypothetical investment
of $1,000 at the beginning of each period.
THE U.S. GOVERNMENT BOND FUND:
<TABLE>
<CAPTION>
Total Return
--------------------------------------------------------------
1 Year 5 Year 10 Year 10.65 Years
Period Ended Period Ended Period Ended Period Ended
Dec. 31, 1995 Dec. 31, 1995 Dec. 31, 1995 Dec. 31, 1995
------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Value of Account
At end of Period $1,183.20 $1,509.21 $2,043.84 $2,238.53
Value of Account
At beginning of Period 1,000.00 1,000.00 1,000.00 1,000.00
--------- --------- --------- ---------
Base Period Return $ 183.20 $ 509.21 $1,043.84 $1,238.53
</TABLE>
21
<PAGE> 123
<TABLE>
<S> <C> <C> <C> <C>
Average Total Return 18.32% 8.58% 7.41% 7.86%
</TABLE>
The Total Return performance data in this hypothetical example,
represents past performance and the investment return and principal value of an
investment will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost.
INVESTMENT ADVISER AND MANAGER
R. Meeder & Associates, Inc. (the "Manager") is the investment adviser
and manager for, and has a separate Investment Advisory Contract with, each
Portfolio. Previously, the Manager managed the assets of the Funds pursuant to
separate investment advisory contracts until May of 1992, at which time the
investment by the Funds in the Portfolios was implemented.
The Investment Advisory Contract for each Portfolio was separately
approved by a vote of a majority of the Trustees, including a majority of those
Trustees who are not "interested persons" (as defined in the Investment Company
Act of 1940) of the Portfolio. Each of these contracts is to remain in force so
long as renewal thereof is specifically approved at least annually by a majority
of the Trustees or by vote of a majority of outstanding shares of each
Portfolio, and in either case by vote of a majority of the Trustees who are not
"interested persons" (as defined in the Investment Company Act of 1940) at a
meeting called for the purpose of voting on such renewals.
Each Investment Advisory Contract will terminate automatically if
assigned and may be terminated without penalty at any time upon 60 days' prior
written notice by Majority Vote of the Portfolio, by the Trustees of the
Portfolio, or by the Manager.
Costs, expenses and liabilities of the Trust attributable to a
particular Fund are allocated to that Fund. Costs, expenses and liabilities
which are not readily attributable to a particular Fund are allocated among all
of the Trust's Funds. Thus, each Fund pays its proportionate share of: the fees
of the Trust's independent auditors, legal counsel, custodian, transfer agent
and accountants; insurance premiums; the fees and expenses of Trustees who do
not receive compensation from R. Meeder & Associates; association dues; the cost
of printing and mailing confirmations, prospectuses, proxies, proxy statements,
notices and reports to existing shareholders; state registration fees;
distribution expenses within the 2/10 of 1% limitation of each Fund's
Distribution Plan, including the cost of printing and mailing of prospectuses
and other materials incident to soliciting new accounts; and other miscellaneous
expenses.
The respective expenses of each Portfolio include the compensation of
their respective Trustees who are not affiliated with the Adviser; registration
fees; membership dues allocable to the Portfolio; fees and expenses of
independent accountants, of legal counsel and of any transfer agent, accountant,
custodian of the Portfolio; insurance premiums and other miscellaneous expenses.
Expenses of each Portfolio also include all fees under its
Administrative Service Agreement; the expenses connected with the execution,
recording and settlement of
22
<PAGE> 124
security transactions; fees and expenses of the Portfolio's custodian for all
services to the Portfolio, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of preparing and mailing
reports to investors and to governmental offices and commissions; expenses of
meetings of investors and Trustees; the advisory fees payable to the Adviser
under the Advisory Contract and other miscellaneous expense.
The Board of Trustees of the Trust believe that the aggregate per share
expenses of any Fund and its corresponding Portfolio will be less than or
approximately equal to the expenses which a Fund would incur if it retained the
services of an investment adviser and the assets of the Fund were invested
directly in the type of securities being held by the Portfolio.
The Manager earns an annual fee, payable in monthly installments as
follows. The fee for the Growth Stock and Mutual Fund Portfolios is based upon
the average net assets of each Portfolio and is at the rate of 1% of the first
$50 million, 0.75% of the next $50 million and 0.60% in excess of $100 million
of average net assets. Annual fees for the Bond Portfolio are at the rate of
0.40% of the first $100 million of average net assets and 0.20% in excess of
$100 million. The annual fee for the Money Market Portfolio is at the rate of
0.40% of the first $100 million and 0.25% in excess of $100 million, of average
net assets.
For the year ended December 31, 1995, the Growth Stock Portfolio paid
fees to the Manager totaling $238,640 ($240,045 in 1994; $259,462 in 1993;
$317,929 in 1992); in The Mutual Fund Portfolio $874,473 ($743,058 in 1994;
$658,238 in 1993; $515,994 in 1992); in the Bond Portfolio $38,275 ($33,422 in
1994; $35,998 in 1993; $22,526 in 1992); in the Money Market Portfolio $299,240
($243,359 in 1994; $232,839 in 1993; $282,926 in 1992).
R. Meeder & Associates, Inc. was incorporated in Ohio on February 1,
1974 and maintains its principal offices at 6000 Memorial Drive, Dublin, Ohio
43017. The Manager is a wholly-owned subsidiary of Muirfield Investors, Inc.
("MII"), which is controlled by Robert S. Meeder, Sr. The Manager's officers and
directors, and the principal offices held by each in MII are as set forth in the
Prospectus under the caption "The Trust and its Management." Mr. Robert S.
Meeder, Sr. is President and a Trustee of the Trust and each Portfolio. Mr.
Robert S. Meeder, Jr., is a Trustee and officer of the Trust and an officer of
each Portfolio. Mr. Philip A. Voelker is a Trustee and officer of each Portfolio
and an officer of the Trust. Each of Messrs. Donald F. Meeder, Wesley F. Hoag
and Steven T. McCabe is an officer of the Trust and each Portfolio.
OFFICERS AND TRUSTEES
The Trust and each Portfolio are managed by its Trustees and officers.
Their names, positions and principal occupations during the past five years are
listed below:
23
<PAGE> 125
<TABLE>
<CAPTION>
Position Principal
Name & Address Held Occupation
- -------------- --------- ----------
<S> <C> <C>
ROBERT S. MEEDER, SR.*+ Trustee/ Chairman of R.
President(1)(2) Meeder & Associates,
Inc., an Investment
Adviser.
MILTON S. BARTHOLOMEW, ESQ. Trustee (2) Retired, formerly a
1424 Clubview Boulevard, S. practicing attorney in
Worthington, OH 43235 Columbus, Ohio.
Member of the
Portfolio's Audit
Committee.
ROGER D. BLACKWELL Trustee (1) Professor of Marketing
Blackwell Associates, Inc. and Consumer
3380 Tremont Road Behavior, The Ohio
Columbus, OH 43221 State University, and
President of Blackwell
Associates, Inc., a
strategic consulting
firm.
JOHN M. EMERY Trustee (1) Retired, formerly Vice
2390 McCoy Road President & Treasurer
Columbus, OH 43220 of Columbus &
Southern Ohio Electric Co. Member
of the Trust's Audit
Committee.
RICHARD A. FARR Trustee (1) President of R&R
3250 W. Henderson Road Supply Co. and
Columbus, OH 43220 General Manager of
RAFCo., Inc., two
companies involved
in engineering, consul-
ting & sales of heating
& air conditioning
equipment.
RUSSEL G. MEANS Trustee (2) Chairman of
4789 Rings Road Employee Benefit
Dublin, OH 43017 Management Corpo-
ration, consultants and
administrators of self-
</TABLE>
24
<PAGE> 126
<TABLE>
<S> <C> <C>
funded health and
retirement plans.
ROBERT S. MEEDER, JR.*+ Trustee 1)/ President/Portfolio
Vice Manager of
President(1)(2) R. Meeder &
Associates, Inc.
WALTER L. OGLE Trustee(2) Executive Vice
One Corporate Drive President of Godwins,
Clearwater, FL 34622 Booke & Dickenson
employee benefit,
compensation and
human resource
consultants.
PHILIP A. VOELKER*+ Trustee(2)/ Senior Vice President
Vice President (1)(2) of R. Meeder &
Associates, Inc.
JAMES B. CRAVER* Assistant Managing Director,
266 Summer Street Secretary(1)(2) Eagle Institutional
Boston, MA 02210 Financial Services, Inc.
(since September
1995); Senior Vice
President of Signature
Financial Group, Inc.
(January 1991 to
August 1995).
WESLEY F. HOAG*+ Vice President(1)(2) General Counsel and
Chief Operating
Officer of R. Meeder
& Associates, Inc.
(since July 1993);
Attorney, Porter,
Wright, Morris &
Arthur, a law firm
(October 1984 to June
1993).
STEVEN T. MCCABE*+ Assistant Vice President,
Treasurer(1)(2) R. Meeder &
Associates, Inc., and
Vice President of
Mutual Funds Service
</TABLE>
25
<PAGE> 127
<TABLE>
<S> <C> <C>
Company.
DONALD F. MEEDER*+ Secretary/ Vice President of R.
Treasurer(1)(2) Meeder & Associates,
Inc., and President of
Mutual Funds Service
Company.
</TABLE>
(1) Trustee and/or officer of The Flex-funds
(2) Trustee and/or officer of each Portfolio
*"Interested Person" of the Trust (as defined in the Investment Company Act of
1940).
+ P.O. Box 7177, 6000 Memorial Drive, Dublin, Ohio 43017.
Trustees and officers of the Trust and the Portfolios own in aggregate
less than 1% of the Trust's outstanding shares. Robert S. Meeder, Sr. is Robert
S. Meeder, Jr.'s father and Donald F. Meeder's uncle.
Several Trustees and each officer of the Trust hold the same positions
with The Flex-Partners, a Massachusetts business trust consisting of three
separate series. Each Trustee and officer of the Portfolio hold the same
positions with each corresponding Portfolio of The Flex-funds and Flex-Partners
Trusts. The Manager serves as the investment adviser to each Portfolio of The
Flex-funds and Flex-Partners Trusts.
The Trust pays each Trustee who is not an "interested person" an annual
fee of $3,000, plus $750 for each meeting of the Board of Trustees attended
regardless of the number of Boards of Trustees on which each Trustee serves. Mr.
Emery comprises the Audit Committee for each of The Flex-funds and The
Flex-Partners Trusts. Mr. Emery is paid $400 for each meeting of the Audit
Committees attended regardless of the number of Audit Committees on which he
serves. Trustee fees for The Flex-funds totaled $12,250 for the year ended
December 31, 1995 ($13,625 in 1994). Mr. Emery comprises the Trust's Audit
Committee. Audit Committee meeting fees totaled $665 for the year ended December
31, 1995 ($800 in 1994). All other officers and Trustees serve without
compensation from the Trust.
The Portfolios pay each Trustee who is not an "interested person" an
annual fee of $3,000, plus $750 for each meeting of the Board of Trustees
attended regardless of the number of Boards of Trustees on which each Trustee
serves. Mr. Bartholomew comprises the Audit Committee for each of the
corresponding Portfolios of The Flex-funds and The Flex-Partners Trusts. Mr.
Bartholomew is paid $400 for each meeting of the Audit Committee attended
regardless of the number of Audit Committees on which he serves. All other
officers and Trustees serve without compensation from the Portfolios. Trustee
fees for all Portfolios combined totaled $22,500 for the year ended December 31,
1995 ($18,750 in 1994). Mr. Bartholomew comprises each Portfolio's Audit
Committee. Audit Committee meeting fees for all Portfolios totaled $800 for the
year ended December 31,
26
<PAGE> 128
1995 ($800 in 1994). All other officers and Trustees of the Portfolios serve
without compensation from any Portfolio.
DISTRIBUTION PLANS
Rule 12b-1 (the "Rule") under the Investment Company Act of 1940 (the
"Act") describes the circumstances under which an investment company such as the
Trust may, directly or indirectly, bear the expenses of distributing its shares.
The Rule defines such distribution expenses to include the cost of any activity
which is primarily intended to result in the sale of Trust shares.
The Trust has adopted a Distribution Plan for each of the four Funds
described herein. These Plans permit, among other things, payment for
distribution in the form of commissions and fees, advertising, the services of
public relations consultants, and direct solicitation. Possible recipients
include securities brokers, attorneys, accountants, investment advisers,
investment performance consultants, pension actuaries, and service
organizations. Another class of recipients is banks. Currently, The Glass -
Steagall Act and other applicable laws, among other things, prohibit banks from
engaging in the business of underwriting, selling or distributing securities.
Since the only function of banks who may be engaged as participating
organizations, is to perform administrative and shareholder servicing functions,
the Trust believes that such laws should not preclude banks from acting as
participating organizations; however, future changes in either federal or state
statutes or regulations relating to the permissible activities of banks and
their subsidiaries or affiliates, as well as judicial or administrative
decisions or interpretations of statutes or regulations, could prevent a bank
from continuing to perform all or a part of its shareholder service activities.
If a bank were prohibited from so acting, its shareholder customers would be
permitted to remain Trust shareholders and alternative means for continuing the
servicing of such shareholders would be sought. In such event, changes in the
operation of the Trust might occur and a shareholder being serviced by such bank
might no longer be able to avail himself, or itself, of any automatic investment
or other services then being provided by the bank. It is not expected that
shareholders would suffer any adverse financial consequences as a result of any
of these occurrences. In addition, state securities laws on this issue may
differ from the interpretations of federal law expressed herein and banks and
financial institutions may be required to register as dealers pursuant to state
law.
The Trust may expend in each of the four Funds as described herein as
much as, but not more than 2/10 of 1% of the Fund's average net assets annually
pursuant to the Plan. A report of the amounts so expended in each such Fund and
the purpose of the expenditures must be made to and reviewed by the Board of
Trustees at least quarterly. In addition, the Plan for each such Fund provides
that it may not be amended to increase materially the costs which the Fund may
bear for distribution pursuant to the Plan without shareholder approval of the
Plan, and that other material amendments of the Plan must be approved by the
Board of Trustees, and by the Trustees who are not "interested persons" of the
Trust (as defined in the Act) and who have no direct or indirect financial
interest in the operation of the Plan or in the related service agreements, by
vote cast in person at a meeting called for the purpose of voting on the Plan.
27
<PAGE> 129
The Plan for each of the Trust's Funds is terminable at any time by
vote of a majority of the Trustees who are not "interested persons" and who have
no direct or indirect financial interest in the operation of the Plan or in any
of the related service agreements or by vote of a majority of the Trust's
shares. Any service agreement terminates upon assignment and is terminable
without penalty at any time by a vote of a majority of the Trustees who are not
"interested persons" and who have no direct or indirect financial interest in
the operation of any of the Plans or in any of the related service agreements,
upon not more than 60 days' written notice to the service organization, or by
the vote of the holders of a majority of the Trust's shares, or, upon 15 days'
notice, by a party to a service agreement.
Each Plan was approved by the Trust's Board of Trustees, who made a
determination that there is a reasonable likelihood that the Plans will benefit
the Funds. The Plans were approved by shareholders and they will continue in
effect only if approved at least annually by the Board of Trustees. The Trust
has entered into agreements whereby a Trustee and a company with which one of
the Trustees is affiliated will be paid for their assistance in explaining and
interpreting the Funds, their investment objectives and policies, and the
Trust's retirement plans, to clients. These include: Russel G. Means, a Trustee
of the Portfolios; and the firm of Ogle and Waters, Inc. with which Walter L.
Ogle, a Trustee of the Portfolios, is affiliated. Total payments made by the
Trust to parties with service agreements for the year ended December 31, 1995
amounted to $134,047 ($117,477 in 1994; $167,979 in 1993). In addition,
expenditures were approved by the Board of Trustees for the printing and mailing
of prospectuses, periodic reports and other sales materials to prospective
investors; advertising; the services of public relations and marketing
consultants; and the cost of special telephone service to encourage the sale of
Fund shares. These expenditures amounted to $172,584 for the year ended December
31, 1995 ($174,876 in 1994; $146,316 in 1993).
The table below states the amounts paid under each current Fund's
distribution plan for the year ended December 31, 1995.
DISTRIBUTION PLAN EXPENSES PAID BY THE FUNDS*
<TABLE>
<CAPTION>
U.S.
Government Money
Type of Expense Growth Muirfield Bond Market
- --------------- ------ --------- ---------- ------
<S> <C> <C> <C> <C>
Payments to
Consultants $ 8,740 $ 55,812 $ 4,412 $ 62,879
---------------------------------------------------
Public Relations $ 7,442 $ 26,298 $ 7,169 $ 17,049
---------------------------------------------------
Marketing/
Advertising $10,773 $ 16,503 $10,535 $ 10,496
---------------------------------------------------
</TABLE>
28
<PAGE> 130
<TABLE>
<S> <C> <C> <C> <C>
Wats Telephone
Service $ 889 $ 2,590 $ 499 $ 4,120
--------------------------------------------------
Printing and Mailing $ 3,019 $ 24,023 $ 1,615 $ 17,570
--------------------------------------------------
Total $30,863 $125,226 $24,230 $112,114
--------------------------------------------------
</TABLE>
*Distribution expenses of the Trust attributable to a particular Fund
are borne by that Fund. Distribution expenses which are not readily identifiable
as attributable to a particular Fund are allocated among each of the five Funds
described above based on the relative size of their average net assets.
In order to comply with certain state requirements, each Fund of the
Trust and its corresponding Portfolio in the aggregate (i) will not pay or
charge sales fees, which may not be used for sales expenses or in lieu of an
additional sales charge or redemption fee; and (ii) the total charges against
net assets for sales distribution activities and/or the servicing of shareholder
accounts will not be in excess of .25% of average net assets per annum.
In addition, any Agent or Consultant that contemplates entering into an
agreement with the Trust for payment in connection with the distribution of Fund
shares, under any Fund's distribution plan, shall be responsible for complying
with any applicable securities or other laws which may be applicable to the
rendering of any such services. It would appear that any Agent or Consultant
would need to be registered as broker/dealer in the state of Texas if Texas
residents are their clients.
FLEX-FUNDS RETIREMENT PLANS
The Trust offers retirement plans which are described in the
Prospectus. Minimum purchase requirements for retirement plan accounts are
subject to the same requirements as regular accounts, except for an IRA, which
has a $500 minimum purchase requirement. Information concerning contribution
limitations for IRA accounts are described below.
Individual Retirement Accounts (IRA):
Limitation on Deductible Contributions - Under prior law an individual
with earned income, not yet 70 1/2 years of age, was allowed a deductible IRA
contribution, limited to the lesser of earned income or $2,000. Effective for
years beginning after December 31, 1986, applicable law limits the deductibility
of IRA contributions where the taxpayer is a participant in an
employer-sponsored retirement plan and has adjusted gross income (AGI) in excess
of $40,000 (joint) and $25,000 (single). For every dollar that AGI exceeds these
limits, the maximum deduction is reduced by twenty cents. Thus, a joint filer
with AGI greater than $50,000 who is covered by an employer sponsored plan will
not be able to make a deductible IRA contribution. The deductible limits for
individuals not covered by an employer-sponsored plan were not changed.
29
<PAGE> 131
Nondeductible Contributions - Individuals who may not make a deductible
contribution due to the limits noted above, may continue to make nondeductible
contributions subject to the prior $2,000 limitation. The earnings on such
contributions will still accumulate on a tax deferred basis. Individuals will be
required to report such contributions on their tax returns.
Rollover Contributions - Individuals who receive certain lump-sum
distributions from employer-sponsored retirement plans may make roll-over
contributions to an IRA and by doing so defer taxes on the distribution and
shelter any investment earnings.
A Spousal IRA is also available.
OTHER SERVICES
Custodian - Star Bank, N.A., Star Bank Center, 425 Walnut Street,
Cincinnati, Ohio 45202, is custodian of all of the Trust's assets.
Auditors - KPMG Peat Marwick LLP, Two Nationwide Plaza, Columbus, Ohio,
43215, has been retained as independent auditors for the Trust.
Stock Transfer Agent - Mutual Funds Service Co., 6000 Memorial Drive,
Dublin, Ohio 43017, a wholly owned subsidiary of Muirfield Investors, Inc., is
the Trust's stock transfer and dividend disbursing agent.
Subadministrator - Signature Financial Group, Inc., 6 St. James Avenue,
Suite 900, Boston, Massachusetts 02116, has been retained as Subadministrator to
provide certain day-to-day administrative services to the Trust.
Reports to Shareholders - The Trust provides shareholders with
quarterly reports of investments and other information, semi-annual financial
statements, and annual reports.
PRINCIPAL HOLDERS OF OUTSTANDING SHARES
As of April 25, 1996, the following persons owned 5% or more of a
class of the Trust's outstanding shares of beneficial interest:
<TABLE>
<CAPTION>
Name Name & Address Amount of Record Percent
of Fund of Beneficial Owner and Beneficially of Class
- ------- ------------------- ---------------- --------
<S> <C> <C> <C>
U.S. Government
Bond Fund Union Fidelity Life Insurance Co. 47,664.442 shares 6.01%
123 N. Wacker Drive
Chicago, IL 60606
Total Return
Utilities Fund Douglas James 32,000.000 13.8%
c/o Key Trust Co.
P.O. Box 94871
Cleveland, OH 44101
Total Return
Utilities Fund Frieda K. Stewart 16,483.975 7.12%
c/o R. Meeder & Associates
6000 Memorial Drive
Dublin, OH 43017
Total Return
Utilities Fund Martin Obsatz 12,387.485 5.3%
Phyllis Obsatz JTWROS
2195 Glasco Turnpike
Woodstock, NY 12498
</TABLE>
The shareholders listed above own shares for investment purposes and
have no known intention of exercising any control of the Trust.
30
<PAGE> 132
ADDITIONAL INFORMATION
Registration Statement: This Statement of Additional Information omits
certain of the information contained in the Registration Statement filed with
the Securities and Exchange Commission by the Trust. Items of information which
are thus omitted may be obtained from the Commission upon payment of the fee
prescribed by its Rules and Regulations, or may be examined at the offices of
the Commission without charge.
FINANCIAL STATEMENTS
Financial statements for all of the Trust's funds and for each
Portfolio are presented on the following pages.
31
<PAGE> 133
<TABLE>
<CAPTION>
MUTUAL FUND PORTFOLIO
Portfolio of Investments as of December 31, 1995
============================================================================================
SHARES OR VALUE
FACE AMOUNT (Notes 1 and 2)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
MUTUAL FUNDS - 81.6%
Acorn International Fund 60 $1,000
Charles Schwab Money Market Fund 8,376,894 8,376,894
Constellation Fund 83 1,879
Fidelity Core Money Market Fund 5,549,983 5,549,983
Fidelity Equity Portfolio Growth Fund 333,197 12,628,156
Fidelity Growth & Income Fund 267,791 7,243,753
Founders Growth Fund 897,745 13,259,700
Neuberger & Berman Focus Fund 387,385 10,819,650
Neuberger & Berman Guardian Fund 457,705 10,540,947
Neuberger & Berman Manhattan Fund 173,284 2,103,666
PBNG Growth Fund 50,605 1,210,472
Pin Oak Aggressive Stock Fund (1) 23,041 384,793
T.Rowe Price New Era Fund 122 2,771
T.Rowe Price New Horizons Fund 724,089 14,843,822
Twentieth Century Ultra Fund 52,948 1,382,468
Twentieth Century Vista Fund 114,172 1,666,912
Weingarten Equity Fund 477,272 8,462,030
White Oak Growth Stock Fund 14,307 256,096
- --------------------------------------------------------------------------------------------
TOTAL MUTUAL FUNDS
(Cost $93,054,647) 98,734,992
- --------------------------------------------------------------------------------------------
U.S.TREASURY BILLS - 1.2%
*U.S..Treasury Bill, 5.29%, due 1/04/96 $150,000 149,912
*U.S. Treasury Bill, 5.22%, due 1/04/96 250,000 249,891
*U.S. Treasury Bill, 5.26%, due 1/04/96 1,000,000 999,486
U.S. Treasury Bill, 6.66%, due 1/11/96 25,200 25,149
- --------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY BILLS
(Cost $1,424,438) 1,424,438
- --------------------------------------------------------------------------------------------
*Pledged $1,400,000 face amount as collateral on futures contracts
REPURCHASE AGREEMENTS - 17.2%
(Collateralized by U.S. government obligations -
market value $21,328,465)
Everen Securities, dated 12/29/95, 5.90%, due 1/02/96 2,550,000 2,550,000
Smith Barney, dated 12/28/95, 5.90%, due 1/02/96 18,250,000 18,250,000
- --------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $20,800,000) 20,800,000
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100%
(Cost $115,279,085) $120,959,430
============================================================================================
FUTURES CONTRACTS
CONTRACTS
- --------------------------------------------------------------------------------------------
Long, S&P 500 futures contracts
face amount $32,468,625 expiring in March, 1996. 105 36,750
Long, Midcap futures contracts
face amount $1,962,450 expiring in March, 1996. 18 9,000
- --------------------------------------------------------------------------------------------
NET RECEIVABLE FOR FUTURES CONTRACTS SETTLEMENTS 45,750
- --------------------------------------------------------------------------------------------
</TABLE>
(1) No dividend paid on security in 1995.
See accompanying notes to financial statements
1995 Flex-funds Annual Report 13
<PAGE> 134
<TABLE>
<CAPTION>
GROWTH STOCK PORTFOLIO
Portfolio of Investments as of December 31, 1995
============================================================================================
SHARES OR VALUE
INDUSTRIES/CLASSIFICATIONS FACE AMOUNT (Notes 1 and 2)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 36.7%
AEROSPACE/DEFENSE - (1.6%)
Boeing Company 6,300 $493,763
- --------------------------------------------------------------------------------------------
ALUMINUM - (1.1%)
Aluminum Company of America 6,300 333,113
- --------------------------------------------------------------------------------------------
AUTO AND TRUCK - (1.1%)
General Motors Corporation 6,300 333,113
- --------------------------------------------------------------------------------------------
BANKING - (1.7%)
J.P. Morgan & Company 6,300 505,575
- --------------------------------------------------------------------------------------------
BEVERAGE - (1.5%)
Coca Cola Company 6,300 467,775
- --------------------------------------------------------------------------------------------
CHEMICAL (BASIC) - (2.2%)
Dupont E.I. Nemours 6,300 440,212
Union Carbide Corporation 6,300 236,250
- --------------------------------------------------------------------------------------------
676,462
- --------------------------------------------------------------------------------------------
CHEMICAL (DIVERSIFIED) - (1.4%)
Minnesota Mining & Manufacturing 6,300 417,375
- --------------------------------------------------------------------------------------------
COMPUTER AND PERIPHERALS - (1.9%)
International Business Machines 6,300 578,025
- --------------------------------------------------------------------------------------------
DRUG - (1.4%)
Merck & Co., Incorporated 6,300 414,225
- --------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - (1.8%)
General Electric Company 6,300 453,600
Westinghouse Electric Corporation 6,300 103,950
- --------------------------------------------------------------------------------------------
557,550
- --------------------------------------------------------------------------------------------
FINANCIAL SERVICES - (.9%)
American Express Company 6,300 260,663
- --------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS - (1.7%)
Proctor & Gamble Company 6,300 522,900
- --------------------------------------------------------------------------------------------
MACHINERY (CONSTRUCTION & MINING) - (1.2%)
Caterpillar Incorporated 6,300 370,125
- --------------------------------------------------------------------------------------------
MULTIFORM - (3.0%)
Allied-Signal Incorporated 6,300 299,250
United Technologies Corporation 6,300 597,712
- --------------------------------------------------------------------------------------------
896,962
- --------------------------------------------------------------------------------------------
PAPER AND FOREST PRODUCTS - (.8%)
International Paper Company 6,300 238,612
- --------------------------------------------------------------------------------------------
</TABLE>
14 1995 Flex-funds Annual Report
<PAGE> 135
<TABLE>
<S> <C> <C>
PETROLEUM (INTEGRATED) - (4.4%)
Chevron Corporation 6,300 330,750
Exxon Corporation 6,300 504,788
Texaco 6,300 494,550
- --------------------------------------------------------------------------------------------
1,330,088
- --------------------------------------------------------------------------------------------
PRECISION INSTRUMENT - (1.4%)
Eastman Kodak Company 6,300 422,100
- --------------------------------------------------------------------------------------------
RECREATION - (1.2%)
Walt Disney Company 6,300 371,700
- --------------------------------------------------------------------------------------------
RESTAURANT - (.9%)
McDonalds Corporation 6,300 284,287
- --------------------------------------------------------------------------------------------
RETAIL STORE - (1.1%)
Sears Roebuck & Company 6,300 245,700
Woolworth Corporation 6,300 81,900
- --------------------------------------------------------------------------------------------
327,600
- --------------------------------------------------------------------------------------------
STEEL (INTEGRATED) - (.3%
Bethlehem Steel Corporation (1) 6,300 88,200
- --------------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES - (1.3%)
American Telephone & Telegraph Corporation 6,300 407,925
- --------------------------------------------------------------------------------------------
TIRE AND RUBBER - (.9%)
Goodyear Tire & Rubber Company 6,300 285,862
- --------------------------------------------------------------------------------------------
TOBACCO - (1.9%)
Philip Morris Companies Incorporated 6,300 570,150
- --------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $11,071,620) 11,154,150
- --------------------------------------------------------------------------------------------
U.S. TREASURY BILLS - 2.5%
*U.S. Treasury Bill, 5.19%, due 1/04/96 $600,000 599,741
*U.S. Treasury Bill, 5.26%, due 1/04/96 100,000 99,956
*U.S. Treasury Bill, 5.29%, due 1/04/96 50,000 49,978
U.S. Treasury Bill, 6.66%, due 1/11/96 6,700 6,687
- --------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY BILLS
(Cost $756,362) 756,362
- --------------------------------------------------------------------------------------------
*Pledged $703,000 face amount as collateral on futures and options contracts
REPURCHASE AGREEMENTS - 30.8%
(Collateralized by U.S. government obligations -
market value $9,527,687)
Everen Securities, dated 12/29/95, 5.90%,
due 1/02/96 3,344,000 3,344,000
Smith Barney, dated 12/28/95, 5.90%,
due 1/02/96 6,000,000 6,000,000
- --------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $9,344,000) 9,344,000
- --------------------------------------------------------------------------------------------
CONTRACTS
OPTIONS PURCHASED - 30.0%
CALL OPTIONS
S&P 500 futures contract expiring March, 1996 at 570 1,650 8,332,500
- --------------------------------------------------------------------------------------------
</TABLE>
Continued on next page
1995 Flex-funds Annual Report 15
<PAGE> 136
<TABLE>
<CAPTION>
GROWTH STOCK PORTFOLIO
Portfolio of Investments, continued
CONTRACTS VALUE
(Notes 1 and 2)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
PUT OPTIONS
S&P 500 futures contract expiring March, 1996 at 590 1,650 792,000
- --------------------------------------------------------------------------------------------
TOTAL OPTIONS PURCHASED
(Cost $8,122,488) 9,124,500
- --------------------------------------------------------------------------------------------
TOTAL INVESTMENTS HELD LONG - 100%
(Cost $29,294,470) $30,379,012
============================================================================================
FUTURES CONTRACTS
Long, S&P 500 futures contracts
face amount $13,527,000 expiring in March, 1996. 43 $17,650
- --------------------------------------------------------------------------------------------
NET RECEIVABLE FOR FUTURES CONTRACTS SETTLEMENTS $17,650
- --------------------------------------------------------------------------------------------
WRITTEN OPTIONS OUTSTANDING AS OF DECEMBER 31, 1995.
CONTRACTS VALUE
(Notes 1 and 2)
- --------------------------------------------------------------------------------------------
CALL OPTIONS
S&F 500 futures contract expiring March, 1996 at 590 1,650 $(5,436,750)
- --------------------------------------------------------------------------------------------
PUT OPTIONS
S&P 500 futures contract expiring March, 1996 at 570 1,650 (420,750)
- --------------------------------------------------------------------------------------------
TOTAL OPTIONS WRITTEN
(Proceeds $4,881,362) $(5,857,500)
============================================================================================
</TABLE>
(1)No dividend paid in 1995.
See accompanying notes to financial statements
16 1995 Flex=funds Annual Report
<PAGE> 137
<TABLE>
<CAPTION>
UTILITIES STOCK PORTFOLIO
Portfolio of Investments as of December 31, 1995
============================================================================================
SHARES OR VALUE
INDUSTRIES/CLASSIFICATIONS FACE AMOUNT (Notes 1 and 2)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 91.6%
ELECTRIC/GAS UTILITY - (6.9%)
MDU Resources Group Incorporated 2,100 $41,738
Montana Power Company 1,300 29,412
Nipsco Industries Incorporated 1,700 65,025
Utilicorp United Incorporated 5,500 161,563
- --------------------------------------------------------------------------------------------
297,738
- --------------------------------------------------------------------------------------------
ELECTRIC UTILITY - (15.0%)
AES Corporation(1) 2,600 62,075
Cinergy Corporation 3,900 119,437
Ipalco Enterprises Incorporated 2,000 76,250
KU Energy Corporation 1,300 39,000
LG&E Energy Corporation 2,300 97,175
Pacificorp 8,000 170,000
Teco Energy Incorporated 3,000 76,875
- --------------------------------------------------------------------------------------------
640,812
- --------------------------------------------------------------------------------------------
DIVERSIFIED UTILITY - (3.8%)
Citizens Utilities Company Class B 12,686 160,158
- --------------------------------------------------------------------------------------------
NATURAL GAS (DISTRIBUTOR) - (19.8%)
Bay State Gas Company 1,700 47,175
Brooklyn UN Gas Company 3,900 114,075
Consolidated Natural Gas Company 2,900 131,587
MCN Corporation 6,200 144,150
Nicor Incorporated 1,800 49,500
Panhandle Eastern Corporation 5,500 153,313
Transcanada Pipelines Ltd. 3,200 44,000
UGI Corporation 2,000 41,500
Wicor Incorporated 3,800 122,550
- --------------------------------------------------------------------------------------------
847,850
- --------------------------------------------------------------------------------------------
OIL/GAS (DOMESTIC) - (7.3%)
Enron Corporation 3,000 114,375
Sante Fe Pacific Pipeline Partners 1,600 58,600
Williams Companies Incorporated 3,200 140,400
- --------------------------------------------------------------------------------------------
313,375
- --------------------------------------------------------------------------------------------
TELECOMMUNICATION EQUIPMENT - (1.7%)
DSC Communications(1) 2,000 73,750
- --------------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES - (33.4%)
Alltel Corporation 5,100 150,450
American Telephone & Telegraph Corporation 1,500 97,125
Ameritech Corporation 2,500 147,500
Bell Atlantic Corporation 1,400 93,625
Century Telephone Enterprise 5,500 174,625
Cincinnati Bell Incorporated 2,000 69,500
Frontier Corporation 6,500 195,000
GTE Corporation 3,200 140,800
Nynex Corporation 300 16,200
Sprint Corporation 2,400 95,700
U.S. West Incorporated 6,000 214,500
United Media Group 2,000 38,000
- --------------------------------------------------------------------------------------------
1,433,025
- --------------------------------------------------------------------------------------------
</TABLE>
Continued on next page
1995 Flex-funds Annual Report 17
<PAGE> 138
UTILITIES STOCK PORTFOLIO
Portfolio of Investments, continued
<TABLE>
<CAPTION>
SHARES OR VALUE
INDUSTRIES/CLASSIFICATIONS FACE AMOUNT (Notes 1 and 2)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
WATER UTILITY - (3.7%)
American Water Works Incorporated 4,100 159,387
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $3,503,676) 3,926,095
- --------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 8.4%
(Collateralized by U.S. government obligations -
market value $360,995)
Everen Securities, dated 12/29/95, 5.90%, due 1/02/96 $360,000 360,000
- --------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $360,000) 360,000
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100%
(Cost $3,863,676) $4,286,095
============================================================================================
</TABLE>
(1)No dividend paid in 1995.
See accompanying notes to financial statements.
18 1995 Flex-funds Annual Report
<PAGE> 139
<TABLE>
<CAPTION>
BOND PORTFOLIO
Portfolio of Investments as of December 31, 1995
============================================================================================
FACE VALUE
AMOUNT (Notes 1 and 2)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
U.S.TREASURY OBLIGATIONS - 85.7%
U.S. Treasury Note, 6.50%, due 8/15/2005 $7,700,000 8,214,938
U.S. Treasury Note, 6.50%, due 5/15/2005 5,000,000 5,327,344
*U.S. Treasury Bill, 5.17%, due 6/06/96 50,000 48,893
U.S. Treasury Bill, 6.66%, due 1/11/96 3,900 3,892
- --------------------------------------------------------------------------------------------
TOTAL U.S.TREASURY OBLIGATIONS
(Cost $12,924,502) 13,595,067
- --------------------------------------------------------------------------------------------
*Pledged $50,000 face amount as collateral on futures and options contracts
REPURCHASE AGREEMENTS - 14.3%
(Collateralized by U.S. Government obligations -
market value $2,271,669)
Everen Securities, dated 12/29/95, 5.90%, due 1/02/96 2,262,000 2,262,000
- --------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $2,262,000) 2,262,000
- --------------------------------------------------------------------------------------------
TOTAL INVESTMENTS HELD LONG - 100%
(Cost $15,186,502) $15,857,067
============================================================================================
FUTURES CONTRACTS
CONTRACTS
Long, 10 Year Bond futures contracts
face amount $2,291,875 expiring in March, 1996. 20 $5,625
- --------------------------------------------------------------------------------------------
NET RECEIVABLE FOR FUTURES CONTRACTS SETTLEMENTS $5,625
- --------------------------------------------------------------------------------------------
WRITTEN OPTIONS OUTSTANDING AS OF DECEMBER 31, 1995:
CONTRACTS VALUE
(Notes 1 and 2)
- --------------------------------------------------------------------------------------------
CALL OPTIONS
U.S. Treasury Note Contract Expiring
February, 1996 at 114 20 $19,063
- --------------------------------------------------------------------------------------------
TOTAL OPTIONS WRITTEN
(Proceeds $10,850) $19,063
- --------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements
1995 Flex-funds Annual Report 19
<PAGE> 140
<TABLE>
<CAPTION>
SHORT-TERM GLOBAL PORTFOLIO
Portfolio of Investments as of December 31, 1995
============================================================================================
FACE AMOUNT VALUE
(Notes 1 and 2)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
U.S.TREASURY - 42.4%
U.S. Treasury Note, 5.875%, due 8/15/98 $1,300,000 $1,321,531
*U.S. Treasury Bill, 5.34%, due 2/15/96 50,000 49,651
U.S. Treasury Bill, 6.66%, due 1/11/96 1,200 1,198
- --------------------------------------------------------------------------------------------
TOTAL U.S.TREASURY BILLS
(Cost $1,355,357) 1,372,380
- --------------------------------------------------------------------------------------------
*Pledged $10,000 face amount as collateral on futures contracts
U.S. GOVERNMENT OBLIGATIONS - 15.5%
Federal National Mortgage Association Discount Note,
5.60%, due 1/04/96 500,000 499,767
- --------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $499,767) 499,767
- --------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 42.1%
(Collateralized by U.S. government obligations -
market value $1,386,192)
Everen Securities, dated 12/29/95, 5.90%, due 1/02/96 612,000 612,000
Smith Barney, dated 12/28/95, 5.90%, due 1/02/96 750,000 750,000
- --------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $1,362,000) 1,362,000
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100%
(Cost $3,217,124) $3,234,147
============================================================================================
FUTURES CONTRACTS - 0.0%
CONTRACTS
Long, Canadian Dollar futures contracts
face amount $366,550 expiring in March, 1996. 5 $(1,150)
- --------------------------------------------------------------------------------------------
NET PAYABLE FOR FUTURES CONTRACTS SETTLEMENTS $(1,150)
- --------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements
20 1995 Flex-funds Annual Report
<PAGE> 141
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
Portfolio of Investments as of December 31, 1995
============================================================================================
FACE VALUE
AMOUNT (Notes 1 and 2)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER - 39.1%
American Honda Finance, 5.73%, due 2/23/96 $10,000,000 $9,915,642
American Honda Finance, 5.62%, due 4/02/96 3,000,000 2,956,913
BOT Financial, 6.20%, due 1/05/96 11,000,000 10,992,422
Dupont Corporation, 6.25%, due 1/03/96 275,000 274,905
Duff & Phelps, 5.47%, due 5/09/96 6,000,000 5,882,395
GTE Corporation, 5.83%, due 2/16/96 10,000,000 9,925,506
Idaho Power, 6.25%, due 1/11/96 140,000 139,757
Jefferson Smurfit, 5.70%, due 3/01/96 1,200,000 1,188,600
Jefferson Smurfit, 5.70%, due 3/19/96 4,000,000 3,950,600
Laclede Gas, 6.25%, due 1/22/96 432,000 430,425
Marsh MacClellan, 5.58%, due 3/14/96 3,120,000 3,084,697
Mitsubishi Motor Credit Corporation, 6.25%, due 1/18/96 518,000 516,471
National Utilities, 5.58%, due 3/12/96 2,000,000 1,977,990
Nynex Corporation, 5.74%, due 2/06/96 3,000,000 2,982,780
Nynex Corporation, 5.77%, due 1/12/96 10,000,000 9,982,369
Pacific Bell, 6.25%, due 1/22/96 390,000 388,578
Public Services Electric & Gas, 5.93%, due 1/11/96 8,142,000 8,128,588
Public Services Electric 6 Gas, 5.90%, due 1/17/96 3,061,000 3,052,973
Tambrands, 5.50%, due 6/04/96 3,500,000 3,417,118
Torchmark, 5.75%, due 2/14/96 10,600,000 10,525,506
Whirlpool Corporation, 5.77%, due 1/31/96 10,700,000 10,648,551
- --------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(Cost $100,362,786) 100,362,786
- --------------------------------------------------------------------------------------------
CORPORATE OBLIGATIONS - 47.9%
American Telephone & Telegraph Capital Corporation, 4.52%,
due 8/30/96 250,000 247,743
American Telephone & Telegraph Capital Corporation, 7.40%,
due 11/01/96 500,000 505,230
Associates Corporation, 7.50%, due 10/15/96 150,000 151,722
Associates Corporation, 4.75%, due 8/01/96 250,000 248,321
BP America, Incorporated, 10.00%, due 3/08/96 5,000,000 5,034,208
BP, Incorporated, 10.15%, due 3/15/96 190,000 191,649
Bank One, Dayton, 5.95%, due 10/02/96 5,000,000 5,000,000
* Bank One Capital Demand Note, 5.83%,
next redemption date 7/11/96, due 4/01/2113 3,510,000 3,510,000
Barnett Bank, 10.00%, due 1/08/96 3,500,000 3,502,308
Bat Industries, 8.60%, due 8/30/96 550,000 558,052
* Bear Stearns Floating Rate Note, 5.76%, due 3/01/96 10,000,000 10,000,000
* Best Sands Corporation Floating Rate Note,
5.95%, next redemption date 1/04/96, due 7/01/2002 850,000 850,000
* Care Life Project Floating Rate Note, 5.95%,
next redemption date 1/04/96, due 8/01/2111 1,375,000 1,375,000
Conrail, 5.20%, due 2/12/96 1,000,000 999,051
Continental Bankcorp, 9.875%, due 6/15/96 1,250,000 1,272,500
Dean Witter, 8.92%, due 3/15/96 1,000,000 1,005,634
Dow Capital Corporation, 8.25%, due 2/15/96 65,000 65,146
Dupont Corporation, 8.45%, due 10/15/96 860,000 897,347
Eastman Kodak, 10.00%, due 6/15/96 125,000 126,948
Eli Lilly Corporation, 6.58%, due 12/20/96 250,000 252,275
*Espanola/Nambe Variable Rate Demand Note, 5.95%,
next redemption date 1/04/96, due 6/01/2006 2,500,000 2,500,000
*Exxon Shipping Floating Rate Note, 5.78%,
next redemption date 1/04/96, due 10/01/2111 7,000,000 7,000,000
Ford Motor Credit Corporation, 8.00%, due 10/01/96 1,800,000 1,825,930
Ford Motor Credit Corporation, 9.07%, due 7/05/96 893,000 906,417
</TABLE>
Continued on next page
1995 Flex-funds Annual Report 21
<PAGE> 142
MONEY MARKET PORTFOLIO
Portfolio of Investments, continued
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (Notes 1 and 2)
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Ford Motor Credit Corporation, 4.85%, due 8/23/96 400,000 397,132
Ford Motor Credit Corporation, 8.25%, due 7/15/96 171,000 172,927
Ford Motor Credit Corporation, 9.10%, due 7/05/96 1,000,000 1,015,476
Ford Motor Credit Corporation, 8.25%, due 5/15/96 1,200,000 1,209,494
General Electric Capital Corporation,
4.615%, next redemption date 5/30/96 1,000,000 994,514
General Motors Acceptance Corporation, 9.00%, due 2/06/96 400,000 401,185
General Motors Acceptance Corporation, 8.00%, due 10/01/96 275,000 279,485
*General Motors Acceptance Corporation Floating Rate Note,
5.805%, next redemption date 4/13/96, due 4/13/98 10,000,000 10,000,000
*Hancor Incorporated Floating Rate Note, 5.95%,
next redemption date 1/04/95, due 12/01/2004 900,000 900,000
Hertz Corporation, 9.125%, due 8/01/96 2,850,000 2,902,407
Honeywell Corporation, 7.875%, due 5/14/96 1,445,000 1,453,511
Household Financial Corporation, 9.375%, due 2/15/96 2,000,000 2,007,835
IBM Corporation, 5.00%, due 2/26/96 250,000 249,698
IBM Credit Corporation, 5.06%, due 11/15/96 1,350,000 1,340,236
IBM Credit Corporation, 4.85%, due 11/05/96 3,000,000 2,973,731
International Bank, 8.75%, due 9/06/96 100,000 101,972
John Deere Corporation, 8.50%, due 4/10/96 200,000 201,383
Lockheed Corporation, 4.875%, due 2/15/96 85,000 84,848
Merrill Lynch & Company, Floating Rate Note, 5.925%,
due 11/18/96 10,000,000 10,000,000
Morgan Stanley Incorporated, 8.875%, due 4/01/96 400,000 402,793
Morgan Stanley Incorporated, 7.32%, due 1/15/97 500,000 507,941
Pacific Gas & Electric, 5.03%, due 3/22/96 800,000 798,800
Pepsico Incorporated, 7.875%, due 8/15/96 2,350,000 2,375,767
Philip Morris Companies, 8.875%, due 7/01/96 1,150,000 1,165,600
*Presrite Corporation Floating Rate Note, 5.95%,
next redemption date 1/04/96, due 1/01/2004 2,880,000 2,880,000
Regions Bank, Louisiana, 6.71%, due 4/11/96 5,000,000 5,011,262
Sears Roebuck & Company, 9.00%, due 9/15/96 1,000,000 1,020,902
Sears Roebuck & Company, 8.55%, due 8/01/96 2,000,000 2,028,466
Smith Barney Holding Company, 5.375%, due 6/01/96 5,380,000 5,365,423
Southwestern Bell, 7.90%, due 8/23/96 1,500,000 1,518,192
Southwestern Bell, 8.30%, due 6/01/96 100,000 101,028
Suntrust Banks, 8.375%, due 3/01/96 1,130,000 1,134,467
U.S. West Capital Funding Corporation, 8.00%, due 10/15/96 290,000 294,634
Unilever, 8.00%, due 5/28/96 450,000 453,838
Union Electric, 5.50% due 5/01/96 100,000 99,868
Virginia Electric & Power, 6.35%, due 5/30/96 3,000,000 3,005,191
Virginia Electric & Power, 8.35%, due 6/15/96 1,000,000 1,010,524
WMX Technologies, 4.875%, due 6/15/96 215,000 213,945
Waste Management Corporation, 7.875%, due 8/15/96 1,000,000 1,011,214
Waste Management Corporation, 4.875%, due 6/15/96 100,000 99,547
Weyerhaeuser Corporation, 8.41%, due 5/17/96 100,000 100,863
White Castle Corporation, Floating Rate Note, 5.95%,
next redemption date 1/04/96 7,000,000 7,000,000
World Book Finance Corporation, 8.125%, due 9/01/96 500,000 506,839
- --------------------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost $122,818,621) 122,818,621
- --------------------------------------------------------------------------------------------
U.S. TREASURY BILLS - 0.1%
U.S. Treasury Bill, 6.66%, due 1/11/96 66,000 67,874
- --------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY BILLS
(Cost $67,874) 67,874
- --------------------------------------------------------------------------------------------
</TABLE>
22 1995 Flex-funds Annual Report
<PAGE> 143
<TABLE>
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS - 4.6%
Federal Farm Credit Note, 5.91%, due 6/24/96 500,000 500,614
*Student Loan Marketing Association Floating Rate Note,
5.70%, due 11/10/98, next redemption date 1/02/96 5,000,000 5,000,000
*Student Loan Marketing Association Floating Rate Note,
5.75%, due 8/03/99, next redemption date 1/02/96 4,350,000 4,355,249
*Student Loan Marketing Association Floating Rate Note,
5.68%, due 11/24/97, next redemption date 1/02/96 2,000,000 1,999,610
- --------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $11,855,473) 11,855,473
- --------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 8.3%
(Collateralized by U.S. government obligations -
market value $21,644,319)
Everen Securities, dated 12/29/95, 5.90%,
due 1/02/96 20,556,000 20,556,000
Star Bank N.A., dated 12/29/95, 5.30%,
due 1/02/96 950,000 950,000
- --------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $21,506,000) 21,506,000
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100%
(Cost $256,610,754) $256,610,754
============================================================================================
</TABLE>
*Floating Rate as of 12/31/95.
See accompanying notes to financial statements
1995 Flex-funds Annual Report 23
<PAGE> 144
STATEMENTS OF ASSETS & LIABILITIES
December 31, 1995
<TABLE>
<CAPTION>
THE THE
TOTAL SHORT-TERM THE
THE THE RETURN THE GLOBAL MONEY
MUIRFIELD GROWTH UTILITIES BOND INCOME MARKET
FUND FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------------------------------------------------
Investment in corresponding portfolio $110,642,016 $24,536,851 $2,880,695 $16,065,894 $3,262,193 $141,144,155
- ---------------------------------------------------------------------------------------------------------------------------
Receivable for capital stock issued 1,573,138 119,903 1,576 394 208 --
- ---------------------------------------------------------------------------------------------------------------------------
Unamortized organizational costs -- -- 22,175 -- 2,548 --
- ---------------------------------------------------------------------------------------------------------------------------
Other assets 411 15,821 -- 2,610 7 7,786
- ---------------------------------------------------------------------------------------------------------------------------
Total Assets 112,215,565 24,672,575 2,904,446 16,068,888 3,264,956 141,151,941
- ---------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------------------------------------------------
Payable for capital stock redeemed 263,854 4,851 -- 4,105 55,504 --
- ---------------------------------------------------------------------------------------------------------------------------
Dividends payable 159,592 21,477 850 7,158 486 29,934
- ---------------------------------------------------------------------------------------------------------------------------
Accrued transfer agent and
administrative fees 11,944 2,911 -- 1,201 430 8,592
- ---------------------------------------------------------------------------------------------------------------------------
Other accrued liabilities 29,054 12,461 22,501 8,767 5,134 26,379
- ---------------------------------------------------------------------------------------------------------------------------
Total Liabilities 464,444 41,700 23,351 21,231 61,554 64,905
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------------------------------------------------------------
Capital 106,200,986 24,522,471 2,548,482 16,312,397 3,315,553 141,087,036
- ---------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed net
investment income (loss) -- -- -- (14) (14) --
- ---------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed
net realized loss on investments (332,908) -- (679) (927,073) (129,158) --
- ---------------------------------------------------------------------------------------------------------------------------
Net unrealized gain on investments 5,883,143 108,404 333,292 662,347 17,021 --
- ---------------------------------------------------------------------------------------------------------------------------
Net Assets $111,751,221 $24,630,875 $2,881,095 $16,047,657 $3,203,402 $141,087,036
- ---------------------------------------------------------------------------------------------------------------------------
Capital Stock Outstanding 19,502,071 1,605,493 203,728 743,760 339,968 141,087,036
- ---------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Offering and
Redemption Price per Share $5.73 $15.34 $14.14 $21.58 $9.42 $1.00
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements
24 1995 Flex-funds Annual Report
<PAGE> 145
STATEMENTS OF OPERATIONS
for the year ended December 31, 1995
<TABLE>
<CAPTION>
THE THE
TOTAL SHORT-TERM THE
THE THE RETURN THE GLOBAL MONEY
MUIRFIELD GROWTH UTILITIES BOND INCOME MARKET
FUND FUND FUND* FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net investment income
from corresponding portfolio:
- ---------------------------------------------------------------------------------------------------------------------------
Interest $1,861,721 $1,070,416 $7,224 $924,456 $236,403 $8,661,557
- ---------------------------------------------------------------------------------------------------------------------------
Dividends 303,932 127,829 47,321 -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Expenses (921,195) (297,385) (28,778) (82,622) (28,725) (292,189)
- ---------------------------------------------------------------------------------------------------------------------------
Total Net Investment Income From
Corresponding Portfolio 1,244,458 900,860 25,767 841,834 207,678 8,369,368
- ---------------------------------------------------------------------------------------------------------------------------
Fund Expenses:
- ---------------------------------------------------------------------------------------------------------------------------
Legal fees 1,501 1,095 1,082 1,095 1,364 1,278
Audit fees 5,454 3,285 846 3,011 1,808 5,215
Printing 19,205 8,057 2,949 4,715 568 41,305
Postage 12,255 4,934 303 2,913 787 27,370
Transfer agent fees 92,170 23,146 2,167 9,347 3,964 99,539
Administrative fee 27,001 6,626 361 4,016 1,079 37,068
Trustees fees and expenses 3,890 3,890 2,794 3,890 4,247 3,490
Registration and filing fees 8,098 8,130 9,025 5,747 4,050 21,880
Insurance 2,498 796 -- 411 205 5,876
Distribution plan 126,340 30,942 2,216 24,266 7,491 112,368
Amortization of organizational costs -- -- 2,633 -- 1,705 --
Other expenses 7,356 2,894 485 2,085 1,309 16,685
- ---------------------------------------------------------------------------------------------------------------------------
Total expenses 305,768 93,795 24,861 61,496 28,577 372,074
Transfer Agent and Administrative
fees reimbursed -- -- (1,686) -- -- --
Expenses reimbursed by adviser -- -- (36,551) -- -- (98,327)
- ---------------------------------------------------------------------------------------------------------------------------
Total Expenses - net 305,768 93,795 (13,376) 61,496 28,577 273,747
- ---------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME - NET 938,690 807,065 39,143 780,338 179,101 8,095,621
- ---------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS - NET:
- ---------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on futures 2,469,756 3,480,755 -- (47,454) (13,513) --
Net realized gain (loss) on
investments 12,270,590 835,253 (679) 1,035,932 43,852 --
Change in unrealized appreciation of
investments 5,883,601 111,505 333,292 667,973 17,439 --
- ---------------------------------------------------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS 20,623,947 4,427,513 332,613 1,656,451 47,778 --
- ---------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $21,562,637 $5,234,578 $371,756 $2,436,789 $226,879 $8,095,621
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
*For the period June 21, 1995 (commencement of operations) to December 31, 1995.
See accompanying notes to financial statements
1995 Flex-funds Annual Report 28
<PAGE> 146
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1994 and December 31, 1995
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
The Total Return
The Muirfield Fund The Growth Fund Utilities Fund*
INCREASE (DECREASE) Year ended December 31, Year ended December 31, Year ended December 31,
IN NET ASSETS: 1995 1994 1995 1994 1995
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Investment income - net $ 938,690 $ 2,097,085 $ 807,065 $ 469,324 $ 39,143
Net realized gain (loss) on
investments and futures contracts 14,740,346 302,942 4,316,008 705,535 (679)
Net change in unrealized
appreciation (depreciation)
of investments 5,883,601 (252,061) 111,505 (1,392,719) 333,292
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations 21,562,637 2,147,966 5,234,578 (217,860) 371,756
- ---------------------------------------------------------------------------------------------------------------------------
DIVIDENDS
AND DISTRIBUTIONS
TO SHAREHOLDERS FROM:
Investment income - net (938,690) (2,097,066) (807,065) (469,410) (39,143)
Tax return of capital -- -- -- -- --
Net realized gain from investments
and futures contracts (15,073,253) (368,554) (659,136) -- --
- ---------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets
resulting from dividends
and distributions (16,011,943) (2,465,620) (1,466,201) (469,410) (39,143)
- ---------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Net proceeds from sales 26,530,545 $ 34,666,417 1,775,837 1,412,121 2,519,770
Reinvestment of dividends 15,844,992 2,445,383 1,436,634 462,346 33,121
Cost of redemptions (19,294,010) (26,738,157) (4,525,935) (5,182,334) (4,409)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from capital share transactions 23,081,527 $ 10,373,643 (1,313,464) (3,307,867) 2,548,482
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE
(DECREASE)
IN NET ASSETS 28,632,221 10,055,989 2,454,913 (3,995,137) 2,881,095
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS - Beginning of year 83,119,000 73,063,011 22,175,962 26,171,099 --
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS - End of year $ 111,751,221 $ 83,119,000 $ 24,630,875 $ 22,175,962 $ 2,881,095
- ---------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Issued 4,353,780 6,427,244 120,106 104,872 201,499
Reinvested 2,767,237 457,656 96,212 35,330 2,569
Redeemed (3,170,312) (4,956,807) (306,553) (389,689) (340)
- ---------------------------------------------------------------------------------------------------------------------------
Change in shares 3,950,705 1,928,093 (90,235) (249,487) 203,728
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
The Short-Term Global The Money Market
The Bond Fund Income Fund Fund
INCREASE (DECREASE) Year ended December 31, Year ended December 31, Year ended December 31,
IN NET ASSETS: 1995 1994 1995 1994 1995 1994
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Investment income - net $ 780,338 $ 470,988 $ 179,101 $ 243,984 $ 8,095,621 6,663,610
Net realized gain (loss) on
investments and futures contracts 988,478 (614,416) 30,339 (147,617) -- --
Net change in unrealized
appreciation (depreciation)
of investments 667,973 (5,626) 17,439 (5,068) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations 2,436,789 (149,054) 226,879 91,299 8,095,621 6,663,610
- -----------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS
AND DISTRIBUTIONS
TO SHAREHOLDERS FROM:
Investment income - net (780,352) (470,968) (173,972) (95,836) (8,095,621) (6,663,610)
Tax return of capital -- -- (5,143) (132,344) -- --
Net realized gain from investments
and futures contracts -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets
resulting from dividends
and distributions (780,352) (470,968) (179,115) (228,180) (8,095,621) (6,663,610)
- -----------------------------------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Net proceeds from sales 2,883,665 2,137,786 1,153,932 1,014,828 365,251,080 449,948,057
Reinvestment of dividends 686,353 408,279 159,800 206,803 7,649,188 6,091,045
Cost of redemptions (2,161,626) (2,080,607) (2,091,734) (11,882,899) (396,651,391) (491,231,317)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from capital share transactions 1,408,392 465,458 (778,002) (10,661,268) (23,751,123) (35,192,215)
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE
(DECREASE)
IN NET ASSETS 3,064,829 (154,564) (730,238) (10,798,149) (23,751,123) (35,192,215)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS - Beginning of year 12,982,828 13,137,392 3,933,640 14,731,789 164,838,159 200,030,374
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS - End of year $ 16,047,657 $ 12,982,828 $ 3,203,402 $ 3,933,640 $ 141,087,036 $ 164,838,159
- -----------------------------------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS:
Issued 142,467 109,576 123,804 108,911 365,251,080 449,948,057
Reinvested 33,492 21,062 17,008 22,129 7,649,188 6,091,045
Redeemed (106,680) (107,118) (222,927) (1,273,867) (396,651,391) (491,231,317)
- -----------------------------------------------------------------------------------------------------------------------------------
Change in shares 69,279 23,520 (82,115) (1,142,827) (23,751,123) (35,192,215)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* For the period June 21, 1995 (commencement of operations) to
December 31, 1995.
See accompanying notes to financial statements
26 1995 Flex-funds Annual Report
<PAGE> 147
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for an average share outstanding during each
period based upon audited financial statements
<TABLE>
<CAPTION>
THE MUIRFIELD FUND YEAR ENDED DECEMBER 31,
- ------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 5.34 $ 5.36 $ 6.25 $ 6.43 $ 5.22
Income from Investment Operations
Net Investment income 0.06 0.14 (0.01) 0.06 0.07
Net Gains or Losses on Securities
(both realized and unrealized) 1.31 0.00 0.45 0.34 1.41
Total From Investment Operations 1.37 0.14 0.44 0.40 1.48
Less Distributions
Dividends (from net investment income) (0.06) (0.14) (0.02) (0.06) (0.27)
Distributions (from capital gains) (0.92) (0.02) (1.31) (0.52) --
Total Distributions (0.98) (0.16) (1.33) (0.58) (0.27)
Net Asset Value, End of period $ 5.73 $ 5.34 $ 5.36 $ 6.25 $ 6.43
Total Return 25.82% 2.70% 8.11% 6.91% 29.83%
Ratios/Supplemental Data
Net Assets, End of Period ($000) 111,751 83,119 73,063 55,280 43,276
Ratio of Expenses to Average Net Assets 1.26% 1.22% 1.26% 1.40% 1.50%
Ratio of Net Investment Income to
Average Net Assets 0.97% 2.55% (0.13%) 1.05% 1.25%
Portfolio Turnover Rate N/A N/A N/A 324.14% 107.05%
<CAPTION>
THE GROWTH FUND YEAR ENDED DECEMBER 31,
- ------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 13.08 $ 13.45 $ 12.70 $ 12.05 $ 10.21
Income from Investment Operations
Net Investment income 0.50 0.27 0.09 0.18 0.34
Net Gains or Losses on Securities
(both realized and unrealized) 2.68 (0.37) 0.82 0.58 1.84
Total From Investment Operations 3.18 (0.10) 0.91 0.76 2.18
Less Distributions
Dividends (from net investment income) (0.50) (0.27) (0.16) (0.11) (0.34)
Distributions (from capital gains) (0.42) -- -- -- --
Total Distributions (0.92) (0.27) (0.16) (0.11) (0.34)
Net Asset Value, End of Period $ 15.34 $ 13.08 $ 13.45 $ 12.70 $ 12.05
Total Return 24.61% (0.69%) 7.21% 6.35% 21.46%
Ratios/Supplemental Data
Net Assets, End of Period ($000) 24,631 22,176 26,171 25,534 32,654
Ratio of Expenses to Average Net Assets 1.64% 1.63% 1.51% 1.51% 1.42%
Ratio of Net Investment Income to
Average Net Assets 3.38% 1.95% 0.69% 1.31% 2.98%
Portfolio Turnover Rate N/A N/A N/A 39.03% 265.32%
</TABLE>
<TABLE>
<CAPTION>
THE TOTAL RETURN UTILITIES FUND FOR THE PERIOD JUNE 21, 1995 (2) TO DEC. 31, 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net Asset Value, beginning of Period $ 12.50
Income from Investment Operations
Net Investment income 0.21
Net Gains or Losses on Securities (both realized and unrealized) 1.64
Total From Investment Operations 1.85
Less Distributions
Dividends (from net investment income) (0.21)
Total Distributions (0.21)
Net Asset Value, End of Period $ 14.14
Total Return 15.00%
Ratios/Supplemental Data
Net Assets, End of Period ($000) 2,881
Ratio of Expenses to Average Net Assets 1.25%(1)
Ratio of Net Investment Income to Average Net Assets 3.18%(1)
Ratio of Expenses to Average Net Assets, before waiver of fees 4.35%(1)
Ratio of Net Investment Income to Average Net Assets, before waiver of fees 0.08%(1)
Portfolio Turnover Rate N/A
</TABLE>
(1)Annualized
(2)Date of commencement of operations
See accompanying notes to financial statements
1995 Flex-funds Annual Report 27
<PAGE> 148
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for an average share outstanding during each
period based upon audited financial statements
<TABLE>
<CAPTION>
THE BOND FUND YEAR ENDED DECEMBER 31,
- ------------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 19.25 $ 20.18 $ 19.46 $ 19.84 $ 18.37
Income from Investment Operations
Net Investment income 1.11 0.72 0.86 0.99 1.23
Net Gains or Losses on Securities
(both realized and unrealized) 2.33 (0.93) 0.71 (0.38) 1.47
Total From Investment Operations 3.44 (0.21) 1.57 0.61 2.70
Less Distributions
Dividends (from net investment income) (1.11) (0.72) (0.85) (0.99) (1.23)
Total Distributions (1.11) (0.72) (0.85) (0.99) (1.23)
Net Asset Value, End of Period $ 21.58 $ 19.25 $ 20.18 $ 19.46 $ 19.84
Total Return 18.32% (0.99%) 8.21% 3.26% 15.30%
Ratios/Supplemental Data
Net Assets, End of Period ($000) 16,048 12,983 13,137 11,100 9,316
Ratio of Expenses to Average Net Assets 1.00% 1.00% 0.99% 1.00% 0.94%
Ratio of Net Investment Income to
Average Net Assets 5.41% 3.71% 4.25% 5.13% 6.59%
Ratio of Expenses to Average Net Assets,
before waiver of fees * 1.14% 1.14% 1.09% 1.21% 1.23%
Ratio of Net Investment Income to Average
Net Assets, before waiver of fees * 5.27% 3.57% 4.15% 4.92% 6.30%
Portfolio Turnover Rate N/A N/A N/A 100.53% 213.65%
</TABLE>
*Includes fees waived in corresponding portfolio
<TABLE>
<CAPTION>
THE SHORT-TERM GLOBAL INCOME FUND
- --------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD
YEAR ENDED DECEMBER 31, MAY 27, 1992 (2)
1995 1994 1993 TO DEC. 31, 1992
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $9.32 $9.41 $9.76 $10.00
Income from Investment Operations
Net Investment income 0.41 0.29 0.43 0.30
Net Gains or Losses on Securities
(both realized and unrealized) 0.11 (0.09) (0.43) (0.24)
Total From Investment Operations 0.52 0.20 0.00 0.06
Less Distributions
Dividends (from net investment income) (0.41) (0.12) -- (0.30)
Returns of Capital (0.01) (0.17) (0.35) --
Total Distributions (0.42) (0.29) (0.35) (0.30)
Net Asset Value, End of Period $9.42 $9.32 $9.41 $9.76
Total Return 5.69% 2.14% 0.38% 0.52%
Ratios/Supplemental Data
Net Assets, End of Period ($000) 3,203 3,934 14,732 34,805
Ratio of Expenses to Average Net Assets 1.45% 1.08% 0.82% 0.85%(1)
Ratio of Net Investment Income to
Average Net Assets 4.52% 3.17% 4.42% 4.85%(1)
Ratio of Expenses to Average Net Assets,
before waiver of fees * 1.85% 1.32% 0.82% 0.90%(1)
Ratio of Net Investment Income to Average
Net Assets, before waiver of fees * 4.12% 2.93% 4.42% 4.80%(1)
Portfolio Turnover Rate N/A N/A N/A N/A
</TABLE>
(1)Annualized
(2)Date of commencement of operations
*Includes fees waived in corresponding portfolio
See accompanying notes to financial statements
28 1995 Flex-funds Annual Report
<PAGE> 149
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for an average share outstanding during each
period based upon audited financial statements
<TABLE>
<CAPTION>
THE MONEY MARKET FUND YEAR ENDED DECEMBER 31,
- -------------------------------------------------------------------------------------------------------------------------------
1995 1994 1983 1992 1991
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00
Income from Investment Operations
Net Investment income 0.06 0.04 0.03 0.04 0.06
Total From Investment Operations 0.06 0.04 0.03 0.04 0.06
Less Distributions
Dividends (from net investment income) (0.06) (0.04) (0.03) (0.04) (0.06)
Total Distributions (0.06) (0.04) (0.03) (0.04) (0.06)
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00
Total Return 5.85% 4.10% 2.98% 3.70% 6.12%
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period ($000) 141,087 164,838 200,030 245,259 316,951
Ratio of Expenses to Average Net Assets 0.40% 0.37% 0.37% 0.35% 0.38%
Ratio of Net Investment Income to
Average Net Assets 5.70% 4.02% 2.94% 3.68% 5.96%
Ratio of Expenses to Average Net Assets,
before waiver of fees * 0.64% 0.57% 0.57% 0.56% 0.56%
Ratio of Net Investment Income to Average
Net Assets, before waiver of fees * 5.46% 3.82% 2.74% 3.47% 5.78%
</TABLE>
*Includes fees waived in corresponding portfolio
See accompanying notes to financial statements
1995 Flex-funds Annual Report 29
<PAGE> 150
THE FLEX-FUNDS
Notes to Financial Statements, December 31, 1995
1. ORGANIZATION
The Flex-funds Trust was organized in 1982 and is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company which is presently comprised of six separate funds (each a "Fund" and
collectively the "Funds") offering six separate series. Effective May 1,1992,
The Money Market, Growth, and Bond Funds began investing all of their investable
assets in a corresponding open-end management investment company (each a
"Portfolio" and collectively the "Portfolios") having the same investment
objective as the Fund. The Short-Term Global Income Fund commenced operations on
May 27, 1992 when it began investing all of its investable assets in a
corresponding open-end management investment company having the same investment
objectives as the Fund. The Muirfield Fund began on January 3, 1993 investing
all of its investable assets in a corresponding open-end management investment
company having the same investment objectives as the Fund. The Total Return
Utilities Fund commenced operations on June 21, 1995 when it began investing all
of its investable assets in a corresponding open-end management investment
company having the same investment objectives as the Fund. The Money Market,
Muirfield, Growth, Bond, Short-Term Global Income and Total Return Utilities
Funds, the Portfolios into which they invest and the percentage of each
portfolio owned by the respective Fund at December 31, 1995 is shown below:
<TABLE>
<CAPTION>
APPROXIMATE
PERCENTAGE OF THE
PORTFOLIO HELD
BY THE FUND AT
FUND PORTFOLIO DECEMBER 31, 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
The Muirfield Fund Mutual Fund Portfolio 91%
- -----------------------------------------------------------------------------------------------------------------------------
The Growth Fund Growth Stock Portfolio 100%
- -----------------------------------------------------------------------------------------------------------------------------
The Total Return Utilities Fund Utilities Stock Portfolio 67%
- -----------------------------------------------------------------------------------------------------------------------------
The Bond Fund Bond Portfolio 100%
- -----------------------------------------------------------------------------------------------------------------------------
The Short-Term Global Income Fund Short-Term Global Portfolio 100%
- -----------------------------------------------------------------------------------------------------------------------------
The Money Market Fund Money Market Portfolio 55%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The financial statements of the Portfolios, including the Portfolios of
Investments, are included elsewhere in this report and should be read in
conjunction with the financial statements of each respective Fund.
2. SIGNIFICANT ACCOUNTING POLICES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Valuation of Investments - Valuation of securities by the Portfolios is
discussed at Note 1 of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report (See page 37).
Income Taxes - It is the Funds' policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of their taxable income to their shareholders. Therefore, no
Federal income tax provision is required.
Distributions to Shareholders - Dividends to shareholders are recorded on the
ex-dividend date.
Organizational Costs - The costs related to the organization of each of the six
Funds have been deferred and are being amortized by each Fund on a straight-line
basis over a five-year period. Such costs for The Growth, Bond, Muirfield and
Money Market Funds have been fully amortized.
3. INVESTMENT ADVISORY AND OTHER AGREEMENTS WITH AFFILIATES
R. Meeder & Associates (RMA), a wholly-owned subsidiary of Muirfield Investors,
Inc. (MII), provides each Portfolio with investment management, research,
statistical and advisory services. Miller/Howard Investments, Inc. (Subadviser)
serves as the Utilities Stock Portfolio's Subadviser under an Investment
Subadvisory Agreement between RMA and the Subadviser.
RMA has agreed to reimburse each Fund for the amount by which annual expenses of
the Fund and its respective Portfolio (excluding interest, taxes, brokerage
fees, and extraordinary expenses) exceed the most restrictive expense limitation
imposed by any State in which such Fund's shares are sold. Such reimbursement is
limited to the total fee charged by RMA. The investment advisory fees reimbursed
in 1995 were at the request of RMA and were not the result of the aforementioned
expense limitations.
Mutual Funds Service Co., (MFS), a wholly-owned subsidiary of MII, serves as
stock transfer, dividend disbursing and shareholder services for all of the
Trust's separate Funds. Subject to a $4,000 annual minimum fee The Growth,
Muirfield, and Total Return Utilities Funds each incur an annual fee equal to
the greater of $15 per shareholder account, or .10% of each Fund's average net
assets, payable monthly. In The Bond and Short-Term Global Income Funds, the
annual fee is the greater of $15 per shareholder account, or .06% of each Fund's
average net assets, payable monthly. In The Money Market Fund, the annual fee is
the greater of $20 per shareholder account, or .06% of the Fund's average net
assets, payable monthly.
30 1995 Flex-funds Annual Report
<PAGE> 151
MFS also provides the Trust with certain administrative services. Each Fund
incurs an annual fee, payable monthly, of .03% of each Fund's average net
assets.
The Funds have adopted distribution expense plans pursuant to Rule 1 2b-1 under
the Investment Company Act of 1940 (the "Plans"). Pursuant to the Plans, the
Funds may annually incur certain expenses associated with the distribution of
fund shares in amounts not to exceed 2/10 of 1% of each Fund's average net
assets, with the exception of The Total Return Utilities Fund whose amount
cannot exceed 25/100 of 1% of average net assets.
Certain officers and/or trustees of the Funds and each Portfolio are officers
and/or directors of MII, RMA and MFS.
4. COMMITMENTS AND CONTINGENCIES
Fidelity Bond and Errors and Omissions insurance coverage for the Trust and its
officers and Trustees has been obtained through ICI Mutual Insurance Company
(ICI Mutual), an industry-sponsored mutual insurance company. As of December 31,
1995, the Trust has made payments of $29,620, in addition to the annual premiums
paid, for the capital reserves of ICI Mutual.
The Trust is also committed to provide $51,055 should ICI Mutual experience the
need for additional capital contributions.
Total assets of $105,000 invested in U.S. Treasury Bills are held in segregated
accounts which collateralizes a standby letter of credit in connection with the
Trust's participation in ICI Mutual.
5. CAPITAL SHARE TRANSACTIONS
At December 31, 1995, an indefinite number of shares of $0.10 par value stock
were authorized in each of the Funds, and paid-in capital amounted to
$141,087,036 in The Money Market Fund, $106,200,986 in The Muirfield Fund,
$24,522,471 in The Growth Fund, $16,312,397 in The Bond Fund, $3,315,553 in The
Short-Term Global Income Fund and $2,548,482 in The Total Return Utilities Fund.
(See Statements of Changes in Net Assets which are included elsewhere in this
report for capital stock transactions.)
6. DISTRIBUTIONS
The Money Market, Bond and Short-Term Global Income Funds declare dividends
daily and distribute monthly all of their net investment income. The Total
Return Utilities Fund declares as dividends and distributes monthly
substantially all of its net investment income. The Muirfield and Growth Funds
declare as dividends and distribute quarterly substantially all of their net
investment income. Net realized capital gains for all Funds, if any, are
distributed annually afier deduction of prior years' loss carryforwards.
Dividends from net investment income and any distributions of realized capital
gains are distributed in cash or reinvested in additional shares of the Funds at
net asset value.
At December 31, 1995, The Bond, Short-Term Global Income and Total Return
Utilities Funds had available for Federal income tax purposes unused capital
loss carryforwards. The amount in The Bond Fund is $930,127 which will expire in
the years 1996 through 2002. The amount in The Short-Term Global Income Fund is
$135,290 which will expire in the years 2000 through 2002. The amount in The
Total Return Utilities Fund is $679 which will expire in 2003.
1995 Flex-funds Annual Report 31
<PAGE> 152
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Trustees of The Flex-funds:
We have audited the accompanying statements of assets and liabilities of The
Flex-funds (comprising, respectively, The Muirfield, Growth, Total Return
Utilities, Bond, Short-Term Global Income and Money Market Funds), as of
December 31, 1995, and the related statements of operations, statements of
changes in net assets and the financial highlights for each of the periods
indicated herein. These financial statements and the financial highlights are
the responsibility of The Flex-funds' management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification of securities owned as of
December 31, 1995, by correspondence with the custodian and other appropriate
audit procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the aforementioned funds comprising The Flex-funds at December 31, 1995, the
results of their operations, the changes in their net assets and the financial
highlights for each of the periods indicated herein, in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
- ---------------------------
KPMG Peat Marwick LLP
Columbus, Ohio
February 2, 1996
32 1995 Flex-funds Annual Report
<PAGE> 153
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<CAPTION>
MUTUAL GROWTH UTILITIES SHORT-TERM MONEY
FUND STOCK STOCK BOND GLOBAL MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS :
Investments at market value* $100,159,430 $21,035,012 $3,926,095 $13,595,067 $1,872,147 $235,104,754
Repurchase Agreements* 20,800,000 9,344,000 360,000 2,262,000 1,362,000 21,506,000
Cash -- -- 121 124 85 206
Receivable for futures contracts
settlement 45,750 17,650 -- 5,625 -- --
Interest receivable 61,492 5,577 177 232,124 29,641 2,245,756
Dividends receivable 1,139,291 21,609 11,374 -- -- --
Prepaid/Other assets 454 109 -- 68 19 1,251
Unamortized organization costs 10,377 7,538 40,146 7,537 7,181 7,538
Total Assets 122,216,794 30,431,495 4,337,913 16,102,545 3,271,073 258,865,505
LIABILITIES:
Payable for securities purchased -- -- -- -- -- 2,680,949
Payable to corresponding Fund -- -- -- -- -- 1,477,153
Payable for futures contracts settlement -- -- -- -- 1,150 --
Written options at market value* -- 5,857,500 -- 19,063 -- --
Payable to investment adviser 85,828 21,414 3,325 4,275 -- 33,706
Accrued fund accounting fees 4,159 2,496 628 1,699 636 4,818
Other accrued liabilities 17,678 13,055 43,090 11,486 7,042 20,505
Total Liabilities 107,665 5,894,465 47,043 36,523 8,828 4,217,131
NET ASSETS:
Capital 116,428,784 24,428,626 3,868,451 15,403,670 3,245,222 254,648,374
Net unrealized gain on investments 5,680,345 108,404 422,419 662,352 17,023 --
Net Assets $122,109,129 $24,537,030 $4,290,870 $16,066,022 $3,262,245 $254,648,374
*Securities at cost 115,279,085 24,413,108 3,863,676 15,175,652 3,217,124 256,610,754
</TABLE>
See accompanying notes to financial statements
1995 Flex-funds Annual Report 33
<PAGE> 154
STATEMENTS OF OPERATIONS
For the year ended December 31, 1995
<TABLE>
<CAPTION>
MUTUAL GROWTH UTILITIES SHORT-TERM MONEY
FUND STOCK STOCK BOND GLOBAL MARKET
PORTFOLIO PORTFOLIO PORTFOLIO* PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME - NET:
Interest $1,911,196 $1,070,422 $8,057 $924,478 $236,424 $12,128,882
- -------------------------------------------------------------------------------------------------------------------------------
Dividends 329,219 127,830 54,996 -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
Total Income 2,240,415 1,198,252 63,053 924,478 236,424 12,128,882
- -------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------------------------------------------------------------------------
Investment advisory fees 874,473 238,640 14,297 57,855 15,829 648,665
Legal fees 1,853 1,679 1,100 1,679 1,609 1,555
Audit fees 13,482 10,234 3,028 9,125 5,544 15,695
Custodian fees 11,483 7,236 1,755 3,624 3,649 17,104
Accounting fees 47,427 28,335 4,065 18,951 7,457 58,111
Trustees fees and expenses 5,223 5,223 3,776 5,223 5,130 5,385
Insurance 2,241 661 -- 369 161 5,920
Amortization of organization cost 5,438 4,978 4,744 4,979 4,745 4,978
Other expenses 399 399 1,611 399 432 432
- -------------------------------------------------------------------------------------------------------------------------------
Total Expenses 962,019 297,385 34,376 102,204 44,556 757,845
Investment advisory fees waived -- -- -- (19,580) (15,829) (349,425)
Directed brokerage payments received -- -- (1,212) -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
Total Expenses - net 962,019 297,385 33,164 82,624 28,727 408,420
- -------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME - NET 1,278,396 900,867 29,889 841,854 207,697 11,720,462
===============================================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
- -------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on futures
contracts 2,494,274 3,480,775 -- (47,455) (13,514) --
- -------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on
investments 13,060,418 835,258 (1,067) 1,035,942 43,853 --
- -------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
of investments 5,680,803 111,506 422,419 667,977 17,441 --
- -------------------------------------------------------------------------------------------------------------------------------
NET GAIN ON INVESTMENTS 21,235,495 4,427,539 421,352 1,656,464 47,780 --
===============================================================================================================================
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $22,513,891 $5,328,406 $451,241 $2,498,318 $255,477 $11,720,462
===============================================================================================================================
</TABLE>
*For the period June 21, 1995 (commencement of operations) to December 31, 1995.
See accompanying notes to financial statements
34 1995 Flex-funds Annual Report
<PAGE> 155
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1994 and December 31, 1995
<TABLE>
<CAPTION>
MUTUAL FUND GROWTH STOCK UTILITIES STOCK
PORTFOLIO PORTFOLIO PORTFOLIO*
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1994 1995 1994 1995
INCREASE(DECREASE)
IN NET ASSETS:
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Investment income- net $ 1,278,396 $ 2,272,777 $ 900,867 $ 565,496 $ 29,889
Net realized gain (loss)
on investments
and futures contracts 15,554,692 302,941 4,316,003 705,537 (1,067)
Net change in unrealized
appreciation (depreciation)
of investments 5,680,803 (252,062) 111,506 (1,392,790) 422,419
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from operations 22,513,891 2,323,656 5,328,406 (121,757) 451,241
- -----------------------------------------------------------------------------------------------------------------------------------
TRANSACTIONS
OF INVESTORS'
BENEFICIAL INTERESTS:
Contributions 34,671,819 26,769,231 1,680,821 1,440,673 3,908,655
Withdrawals (18,261,284) (27,513,563) (4,640,744) (5,322,563) (69,026)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting from
transactions of investors'
beneficial interests 16,410,535 (744,332) (2,959,923) (3,881,890) 3,839,629
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE
(DECREASE)
IN NET ASSETS 38,924,426 1,579,324 2,368,483 (4,003,647) 4,290,870
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS -
Beginning of period 83,184,703 81,605,379 22,168,547 26,172,194 --
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS -
End of period $ 122,109,129 $ 83,184,703 $ 24,537,030 $ 22,168,547 $ 4,290,870
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
BOND SHORT-TERM GLOBAL MONEY MARKET
PORTFOLIO PORTFOLIO PORTFOLIO
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1994 1995 1994 1995 1994
INCREASE(DECREASE)
IN NET ASSETS:
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Investment income- net $ 841,854 $ 526,976 $ 207,697 $ 279,212 $ 11,720,462 $ 8,115,651
Net realized gain (loss)
on investments
and futures contracts 988,487 (614,421) 30,339 (147,601) -- --
Net change in unrealized
appreciation (depreciation)
of investments 667,977 (5,626) 17,441 (5,068) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets
resulting from operations 2,498,318 (93,071) 255,477 126,543 11,720,462 8,115,651
- -----------------------------------------------------------------------------------------------------------------------------------
TRANSACTIONS
OF INVESTORS'
BENEFICIAL INTERESTS:
Contributions 2,890,694 2,140,676 1,159,854 1,025,710 753,617,719 733,486,217
Withdrawals (2,330,962) (2,217,176) (2,087,949) (11,962,648) (735,213,083) (717,226,708)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting from
transactions of investors'
beneficial interests 559,732 (76,500) (928,095) (10,936,938) 18,404,636 16,259,509
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE
(DECREASE)
IN NET ASSETS 3,058,050 (169,571) (672,618) (10,810,395) 30,125,098 24,375,160
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS -
Beginning of period 13,007,972 13,177,543 3,934,863 14,745,258 224,523,276 200,148,116
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS -
End of period $ 16,066,022 $ 13,007,972 $ 3,262,245 $ 3,934,863 $ 254,648,374 $ 224,523,276
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*For the period June 21, 1995 (commencement of operations) to December 31, 1995.
See accompanying notes to financial statements
1995 Flex-funds Annual Report 35
<PAGE> 156
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Mutual Fund Portfolio
<TABLE>
<CAPTION>
Year Ended Dec. 31,
Ratios/Supplemental Data 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Assets, End of Period ($000) 122,109 83,185 81,605
Ratio of Expenses to Average Net Assets* 0.95% 1.01% 1.03%
Ratio of Net Investment Income to Average Net Assets 1.26% 2.76% 0.09%
Portfolio Turnover Rate 186.13% 168.17% 279.56%
</TABLE>
- --------------------------------------------------------------------------------
Growth Stock Portfolio
<TABLE>
<CAPTION>
For The Period
Year Ended Dec. 31, May 1, 1992
Ratios/Supplemental Data 1995 1994 1993 to Dec 31, 1992
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Assets, End of Period ($000) 24,537 22,169 26,172 25,556
Ratio of Expenses to Average Net Assets* 1.25% 1.23% 1.23% 1.22% (1)
Ratio of Net Investment Income to Average Net Assets 3.78% 2.35% 0.99% 2.04% (1)
Portfolio Turnover Rate 337.57% 102.76% 99.54% 129.44%
Average brokerage commission per share $0.0806 N/A N/A N/A
</TABLE>
(1)Annualized
- --------------------------------------------------------------------------------
UTILITIES STOCK PORTFOLIO
<TABLE>
<CAPTION>
For The Period
June 21, 1995*
Ratios/Supplemental Data to Dec. 31, 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net Assets, End of Period ($000) 4,291
Ratio of Expenses to Average Net Assets* 2.32%(1)
Ratio of Net Investment Income to Average Net Assets 2.09%(1)
Ratio of Expenses to Average Net Assets
before directed brokerage payments 2.40%(1)
Ratio of Net Investment Income to Average Net Assets
before directed brokerage payments 2.01%(1)
Portfolio Turnover Rate 5.06%
Average brokerage commission per share $0.0600
</TABLE>
(1)Annualized
*Date of commencement of operations
- --------------------------------------------------------------------------------
Bond Portfolio
<TABLE>
<CAPTION>
For The Period
Year Ended December 31, May 1, 1992
Ratios/Supplemental Data 1995 1994 1993 to Dec. 31, 1992
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Assets, End of Period ($000) 16,066 13,008 13,178 11,126
Ratio of Expenses to Average Net Assets* 0.57% 0.56% 0.60% 0.58%(1)
Ratio of Net Investment Income to Average Net Assets 5.82% 4.15% 4.62% 5.40%(1)
Ratio of Expenses to Average Net Assets, before waiver of fees 0.71% 0.70% 0.71% 0.80%(1)
Ratio of Net Investment Income to Average
Net Assets, before waiver of fees 5.68% 4.01% 4.51% 5.18%(1)
Portfolio Turnover Rate 232.34% 707.57% 235.74% 132.53%
</TABLE>
(1) Annualized
- --------------------------------------------------------------------------------
Short-Term Global Portfolio
<TABLE>
<CAPTION>
For The Period
Year Ended December 31, May 27, 1992
Ratios/Supplemental Data 1995 1994 1993 to Dec. 31, 1992
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Assets, End of Period ($000) 3,262 3,935 14,745 34,809
Ratio of Expenses to Average Net Assets* 0.73% 0.62% 0.64% 0.66%(1)
Ratio of Net Investment Income to Average Net Assets 5.24% 3.62% 4.58% 3.88%(1)
Ratio of Expenses to Average Net Assets, before waiver of fees 1.13% 0.86% 0.64% 0.72%(1)
Ratio of Net Investment Income to Average Net Assets, before waiver of fees 4.84% 3.38% 4.58% 3.82%(1)
Portfolio Turnover Rate 369.36% 0.00% 780.99% 380.28%(1)
</TABLE>
(1) Annualized
- --------------------------------------------------------------------------------
Money Market Portfolio
<TABLE>
<CAPTION>
For the Period
Year Ended Dec. 31, May 1, 1992
Ratios/Supplemental Data 1995 1994 1993 to Dec. 31, 1992
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Assets, End of Period ($000) 254,648 224,523 200,148 244,272
Ratio of Expenses to Average Net Assets* 0.21% 0.19% 0.19% 0.18%(1)
Ratio of Net Investment Income to Average Net Assets 5.87% 4.28% 3.09% 3.60%(1)
Ratio of Expenses to Average Net Assets, before waiver of fees 0.38% 0.39% 0.40% 0.40%(1)
Ratio of Net Investment Income to Average Net Assets, before waiver of fees 5.70% 4.08% 2.88% 3.38%(1)
Portfolio Turnover Rate N/A N/A N/A N/A
</TABLE>
(1)Annualized
*Please refer to pages 27-29 for total expense ratios relating to each
corresponding Fund.
See accompanying notes to financial statements
36 1995 Flex-funds Annual Report
<PAGE> 157
MUTUAL FUND PORTFOLIO
GROWTH STOCK PORTFOLIO
UTILITIES STOCK PORTFOLIO
BOND PORTFOLIO
SHORT-TERM GLOBAL PORTFOLIO
MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Each separate Portfolio (the "Portfolios") is registered under the Investment
Company Act of 1940, as amended, as a no-load, open-end management investment
company which was organized as a trust under the laws of the State of New York.
Each Declaration of Trust permits the Trustees, who are the same for all the
Portfolios, to issue beneficial interests in each Portfolio. The following is a
summary of significant accounting policies followed by the Portfolios.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Investments - Money market securities held in the Money Market Portfolio are
valued at amortized cost, which approximates market value in accordance with
Rule 2a-7 of the Investment Company Act of 1940. Money market securities held in
the five remaining Portfolios maturing more than sixty days after the valuation
date are valued at the last sales price as of the close of business on the day
of valuation, or, lacking any sales, at the most recent bid price or yield
equivalent as obtained from dealers that make markets in such securities. When
such securities are valued within sixty days or less to maturity, the difference
between the valuation existing on the sixty-first day before maturity and
maturity value is amortized on a straight-line basis to maturity. Securities
maturing within sixty days from their date of acquisition are valued at
amortized cost.
Securities which are traded on stock exchanges are valued at the last sales
price as of the close of business of the New York Stock Exchange on the day of
valuation, or, lacking any sales, at the closing bid prices. Securities traded
on the over-the-counter market are valued at the most recent bid price or yield
equivalent as obtained from one or more dealers that make markets in such
securities. Mutual funds are valued at the daily redemption value determined by
the underlying fund. Valuations in The Bond and Short-Term Global Portfolios are
determined as of 3:00 p.m. Eastern time.
Repurchase Agreements - It is the Portfolios' policy to take possession of the
collateral for repurchase agreements before payment is made to the seller.
Market value of the collateral must be at least 100% of the amount of the
repurchase agreement. During the period ended December 31, 1995 the Portfolios
wrote the following option contracts:
<TABLE>
<CAPTION>
Growth Stock Portfolio Bond Portfolio Mutual Fund Portfolio Short-Term Global Portfolio
No. of No. of No. of No. of
Contracts Premiums Contracts Premiums Contracts Premiums Contracts Premiums
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding at Beginning of Period 0 $ 0 0 $ 0 0 $ 0 0 $ 0
- ------------------------------------------------------------------------------------------------------------------------------------
Options Written 3,342 4,927,214 185 67,650 173 186,057 24 7,470
- ------------------------------------------------------------------------------------------------------------------------------------
Options Terminated (42) (45,852) (165) (56,800) (173) (186,057) (24) (7,470)
- ------------------------------------------------------------------------------------------------------------------------------------
Outstanding at End of Period 3,300 $4,881,362 20 $ 10,850 0 $ 0 0 $ 0
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Options & Futures - Each Portfolio except the Money Market Portfolio may engage
in transactions in financial futures contracts and options as a hedge against
the change in market value of the securities held in the portfolio, or which it
intends to purchase. The expectation is that any gain or loss on such
transactions will be substantially offset by any gain or loss on the securities
in the underlying portfolio or on those which are being considered for purchase.
To the extent that the Portfolio enters into futures contracts on an index or
group of securities the Portfolio exposes itself to an indeterminate liability
and will be required to pay or receive a sum of money measured by the change in
the market value of the index. Upon entering into a futures contract the
Portfolio is required to deposit either cash or securities in an amount
("initial margin") equal to a certain percentage of the contract value.
Subsequent payments ("variation margin") equal to changes in the daily
settlement price or last sale on the exchanges where they trade are paid or
received each day and are recorded as a gain or loss on futures contracts.
In the case of the Short-Term Global Portfolio, futures and options contracts
entered into will typically be futures and options on futures of a foreign
currency. The Portfolio is presently engaging only in the buying and selling of
futures contracts on foreign currencies. The expectation is that the Portfolio
will be able to participate in interest rate differentials between the U.S.
dollar and foreign currencies by investing in futures on the foreign currencies
in lieu of investing in short-term foreign debt instruments. At the same time,
the Portfolio will take advantage of the favorable transaction cost associated
with the purchase of a futures contract in lieu of a cash instrument. To the
extent that the Portfolio enters into futures contracts on foreign currencies,
the Portfolio exposes itself to a liability, which at a maximum cannot exceed
the value given for the contracts, and will be required to pay or receive a sum
of money measured by the change in the market value of that currency's index.
Call and put option contracts involve the payment of a premium for the right to
purchase or sell an individual security or index aggregate at a specified price
until the expiration of the contract. Such transactions expose the Portfolio to
the loss of the premium paid if the Portfolio does not sell or exercise the
contract prior to the expiration date. In the case of a call option, sufficient
cash or money market
1995 Flex-funds Annual Report 37
<PAGE> 158
instruments will be segregated to complete the purchase. Options are valued on
the basis of the daily settlement price or last sale on the exchanges where they
trade and the changes in value are recorded as an unrealized gain or loss until
sold, exercised or expired. In the case of a written option, premiums received
by each portfolio upon writing the option are recorded in the liability section
of the Statement of Assets and Liabilities and are subsequently adjusted to
current market value. When the written option is closed, exercised or expired,
the portfolio realizes a gain or loss and the liability is eliminated.
Income Taxes - It is the Portfolios' policy to comply with the requirements of
the Internal Revenue Code applicable to it. Therefore, no Federal income tax
provision is required.
Organizational Costs - The costs related to the organization of each of the six
Portfolios have been deferred and are being amortized by each Portfolio on a
straight-line basis over a five-year period.
Other - The Portfolios follow industry practice and record security transactions
on the trade date. Gains and losses on security transactions are determined on
the specific identification basis. Dividend income is recognized on the
ex-dividend date, and interest income (including amortization of premium and
discount) is recognized as earned.
2. INVESTMENT ADVISORY, AND OTHER AGREEMENTS WITH AFFILIATES
R. Meeder & Associates (RMA), a wholly-owned subsidiary of Muirfield Investors,
Inc. (MII), provides the Portfolios with investment management, research,
statistical and advisory services, and pays certain other expenses of the
Portfolios. Miller/Howard Investments, Inc. (Subadviser) serves as the Utilities
Stock Portfolio's Subadviser under an Investment Subadvisory Agreement between
RMA and the Subadviser. For such services the Portfolios pay monthly a fee based
upon the average daily value of each Portfolios' net assets at the following
annual rates: Mutual Fund, Growth Stock, and Utilities Stock Portfolio, 1% of
average net assets up to $50 million, 0.75% of average net assets exceeding $50
million up to $100 million and 0.60% of average net assets exceeding $100
million; Bond and Short-Term Global Income Portfolios, 0.40% of average net
assets up to $100 million and 0.20% of average net assets exceeding $100
million; Money Market Portfolio, 0.40% of average net assets up to $100 million
and 0.25% of average net assets exceeding $100 million. During the year ended
December 31, 1995, RMA voluntarily waived a portion of its investment advisory
fees in the Money Market and Bond Portfolios, and all of its investment advisory
fees in the Short-Term Global Income Portfolio.
Mutual Funds Service Co., (MFS), a wholly-owned subsidiary of MII, serves as
accounting services agent for all of the Portfolios. The minimum annual fee for
all such services for the Mutual Fund, Growth Stock, Bond, Short-Term Global,
and Utilities Stock Portfolios is $7,500. Subject to the applicable minimum fee,
each Portfolio's annual fee, payable monthly, is computed at the rate of 0.15%
of the first $10 million, 0.10% of the next $20 million, 0.02% of the next $50
million, and 0.01% in excess of $80 million of the respective Portfolio's
average net assets. In the Money Market Portfolio the minimum annual fee for
accounting services is $30,000. Subject to the applicable minimum fee, the Money
Market Portfolio's annual fee, payable monthly, is computed at the rate of 0.15%
of the first $10 million, 0.10% of the next $20 million, 0.02% of the next $50
million and 0.01% in excess of $80 million of the Portfolio's average net
assets. Certain officers and/or trustees of the Funds and each Portfolio are
officers and/or directors of MII, RMA and MFS.
3. PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, excluding short-term investments and U.S.
Government and agency obligations for the year ended December 31, 1995 were as
follows:
<TABLE>
<CAPTION>
Purchases Sales
- --------------------------------------------------------------------------------
<S> <C> <C>
Mutual Fund Portfolio $153,526,438 $77,373,285
- --------------------------------------------------------------------------------
Growth Stock Portfolio $ 20,462,275 $10,183,074
- --------------------------------------------------------------------------------
Utilities Stock Portfolio $ 3,636,056 $ 131,312
- --------------------------------------------------------------------------------
</TABLE>
As of December 31, 1995, the aggregate cost of investments and net unrealized
appreciation (depreciation) for Federal income tax purposes was comprised of the
following:
<TABLE>
<CAPTION>
Net Unrealized
Unrealized Unrealized Appreciation
Investment Appreciation Depreciation (Depreciation)
Cost of Investments of Investments of Investments
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mutual Fund Portfolio $115,644,899 $6,814,624 $(1,500,093) $5,314,531
- ----------------------------------------------------------------------------------------------------------------------------
Growth Stock Portfolio $ 24,438,982 $4,474,745 $(4,392,215) $ 82,530
- ----------------------------------------------------------------------------------------------------------------------------
Utilities Stock Portfolio $ 3,863,676 $ 428,434 $ (6,015) $ 422,419
- ----------------------------------------------------------------------------------------------------------------------------
Bond Portfolio $ 15,173,624 $ 664,380 $ 0 $ 664,380
- ----------------------------------------------------------------------------------------------------------------------------
Short-Term Global
Portfolio $ 3,217,124 $ 17,023 $ 0 $ 17,023
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
38 Flex-funds Annual Report
<PAGE> 159
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Index to Financial Statements
Financial Statements included in Part A
Financial Highlights
Financial Statements included in Part B
REGISTRANT--THE FLEX-FUNDS
Statements of Assets and Liabilities - December 31, 1995
Statements of Operations - For the period ended December 31,
1995
Statements of Changes in Net Assets - for the years ended
December 31, 1995 and 1994 for The Money Market,
Muirfield, Growth, Bond and Short-Term Global Income
Funds, and for the period June 21, 1995 to
December 31, 1995 for The Total Return Utilities Fund
Financial Highlights
Notes to Financial Statements
Independent Auditors' Report dated February 2, 1996.
PORTFOLIOS--MONEY MARKET, MUTUAL FUND, GROWTH
STOCK, SHORT-TERM GLOBAL, UTILITIES STOCK AND BOND
PORTFOLIOS
Portfolio of Investments - December 31, 1995 Statements of
Assets and Liabilities - December 31, 1995 Statements of
Operations - For the period ended December 31, 1995
Statements of Changes in Net Assets for the years ended
December 31, 1995 and 1994 for the Money Market, Mutual
Fund, Growth Stock, Short-Term Global Income and Bond
Portfolios, and for the period June 21, 1995 to December
31, 1995 for the Utilities Stock Portfolio
Financial Highlights - for the years ended December 31, 1995
and 1994, and for the period May 1, 1992 to December 31,
1992 for the Money Market, Mutual Fund, Growth Stock,
Short-Term Global Income and Bond Portfolios; and for the
period June 21, 1995 to December 31, 1995 for the
Utilities Stock Portfolio
Notes to Financial Statements
Independent Auditors' Report dated February 2, 1996.
Statements and schedules other than those listed above are omitted because
they are not required, or because the information required is included in
the financial statements or notes thereto.
<PAGE> 160
(b) Exhibits:
1. Declaration of Trust (effective December 30, 1991)--filed as an
exhibit to Registrant's Post-Effective Amendment No. 18 on
January 16, 1992, which exhibit is incorporated herein by
reference.
2. By-laws of the Trust--filed as an exhibit to Registrant's
Post-Effective Amendment No. 18 on January 16, 1992, which
exhibit is incorporated herein by reference.
3. Custodian Agreement -- filed as an exhibit to Registrant's
Post-Effective Amendment No. 16 on April 9, 1991, which exhibit
is incorporated herein by reference.
4. Administrative Services Agreement between The Flex-funds and
Mutual Funds Service Co.--filed as an Exhibit to Registrant's
Post-Effective Amendment No. 31 on or about February 28, 1995,
which exhibit is incorporated by reference herein.
5. Other opinions, etc. -- filed herewith:
a. Consent of KPMG Peat Marwick LLP, Independent Certified
Public Accountants.
6. Agreements etc. for initial capital, etc. -- reference is made
to Part II, Item 1(b)(13) of Registrant's First Pre-effective
Amendment to the Registration Statement on Form N-1 filed with
the Commission on or about July 20, 1982, and is incorporated
herein by reference.
7. Model Plans and related documents to be used in the
establishment of retirement plans in conjunction with shares of
the Registrant -- incorporated by reference to Part II, Item
1(b)(14) of Registrant's First Pre-effective Amendment of the
Registration Statement on Form N-1 filed with the Commission on
or about July 20, 1982, and is incorporated herein by reference.
8. 12b-1 Plans for The Growth Fund, The U.S. Government Bond Fund
and The Money Market Fund -- reference is made to the exhibits
referred to in Part C, Item 24(b)(15) of Registrant's Third
Post-Effective Amendment to the Registration Statement on Form
N-1A filed with the Commission on or about March 1, 1985, and is
incorporated herein by reference. The 12b-1 Plan for The
Muirfield Fund was filed as an exhibit to Registrant's 10th
Post-Effective Amendment to Form N-1A filed with the Commission
on August 5, 1988, and is incorporated herein by reference. The
12b-1 and Service Plan for the Total Return Utilities Fund was
filed as an exhibit to the Registrant's 29th Post-Effective
Amendment to Form N-1A filed with the Commission on January 12,
1995 and is incorporated herein by reference.
9. Schedules for computation of performance quotations for The
Growth Fund, The U.S. Government Bond Fund, The Money Market
Fund, The Total Return Utilities Fund and The Muirfield Fund are
filed herewith.
10. Powers of Attorney of Trustees of Registrant. Previously filed
and incorporated herein by reference.
<PAGE> 161
11. Powers of Attorney of Trustees of each Portfolio. Previously
filed and incorporated herein by reference.
Item 25. Persons Controlled by or under Common Control with Registrant.
None.
Item 26. Number of Holders of Securities at December 31, 1995.
<TABLE>
<CAPTION>
Title of Number of
Class Fund Record Holders
----- ---- --------------
<S> <C> <C>
Shares of Growth Fund 1,153
Beneficial Muirfield Fund 2,706
Interest U.S. Government Bond Fund 594
Money Market Fund 5,084
Total Return Utilities Fund 86
Short-Term Global Income Fund 95
</TABLE>
Item 27. Indemnification
Reference is made to Section 5.3 of the Declaration of Trust filed
as an original exhibit to Registrant's Post-Effective Amendment No.
18 on January 16, 1992. As provided therein, the Trust is required
to indemnify its officers and trustees against claims and liability
arising in connection with the affairs of the Trust, except
liability arising from breach of trust, bad faith, willful
misfeasance, gross negligence or reckless disregard of duties. The
Trust is obligated to undertake the defense of any action brought
against any officer, trustee or shareholder, and to pay the expenses
thereof if he acted in good faith and in a manner he reasonably
believed to in or not opposed to the best interest of the Trust, and
with respect to any criminal action had no reasonable cause to
believe his conduct was unlawful. Other conditions are applicable to
the right of indemnification as set forth in the Declaration of
Trust. In applying these provisions, the Trust will comply with the
provisions of the Investment Company Act.
Item 28. Business and Other Connections of Investment Adviser.
Not applicable.
Item 29. Principal Underwriters.
Not applicable.
Item 30. Location of Accounts and Records.
Registrant's Declaration of Trust, By-laws, and Minutes of Trustees'
and Shareholders' Meetings, and contracts and like documents are in
the physical possession of Mutual Funds Service Co., or R. Meeder &
Associates, Inc., at 6000 Memorial Drive, Dublin, Ohio 43017.
Certain custodial records are in the custody of Star Bank, N.A., the
Trust's custodian, at 425 Walnut Street, Cincinnati, Ohio 45202.
<PAGE> 162
All other records are kept in the custody of R. Meeder & Associates,
Inc. and Mutual Funds Service Co., 6000 Memorial Drive, Dublin, OH
43017.
Item 31. Management Services.
None
Item 32. Undertakings.
(a) Not applicable.
(b) Not applicable.
(c) If the information called for by Item 5A of this Registration
Statement is contained in the latest annual report to
shareholders, Registrant undertakes to furnish each person to
whom a prospectus is delivered with a copy of the Registrant's
latest annual report to shareholders, upon request and without
charge.
(d) The Registrant undertakes to call a meeting of shareholders for
the purpose of voting upon the question of removal of one or
more directors, if requested to do so by the holders of at least
10% of the Registrant's outstanding shares, and will assist
communications among shareholders as set forth within Section
16(c) of the 1940 Act.
<PAGE> 163
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that this Amendment to
its Registration Statement meets all of the requirements for effectiveness of
this Amendment to its Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Dublin, and the State of Ohio on the 29th day of
April, 1996.
THE FLEX-FUNDS
BY: Donald F. Meeder
----------------------------
Donald F. Meeder,
Secretary/Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Date Signed April 29, 1996 Donald F. Meeder
-------------------------------------
Donald F. Meeder, Secretary/Treasurer
As Attorney-in-Fact pursuant to
Special Powers of Attorney,
copies of which are enclosed herewith
as Exhibits, for Roger D. Blackwell, Richard A. Farr,
John M. Emery, Robert Meeder, Jr., and Robert Meeder, Sr.,
Trustees of The Flex-funds
Donald F. Meeder
-------------------------------------
Date Signed April 29, 1996 Donald F. Meeder, Attorney-in-Fact
<PAGE> 164
SIGNATURES
Mutual Fund Portfolio (the "Portfolio") has duly caused this
Post-Effective Amendment to the Registration on Form N-1A of The Flex-funds
(File No. 2-85378) to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Dublin and State of Ohio on the 29th day of April,
1996.
MUTUAL FUND PORTFOLIO
By: Donald F. Meeder
----------------------------
Donald F. Meeder
This Post-Effective Amendment to the Registration Statement on Form
N-1A of The Flex-funds (File No. 2-85378) has been signed below by the following
persons in the capacities with respect to the Portfolio indicated on April 29,
1996.
Signature Title
--------- -----
Robert S. Meeder, Sr.* President and Trustee
- ------------------------------
Robert S. Meeder, Sr.
Milton S. Bartholomew* Trustee
- ------------------------------
Milton S. Bartholomew
Russel G. Means* Trustee
- ------------------------------
Russel G. Means
Donald F. Meeder
- ------------------------------ Secretary/Treasurer, Principal Financial
Donald F. Meeder Officer and Principal Accounting Officer
Walter L. Ogle* Trustee
- ------------------------------
Walter L. Ogle
Philip A. Voelker* Vice President and Trustee
- ------------------------------
Philip A. Voelker
*By: Donald F. Meeder
-------------------------
Donald F. Meeder
Executed by Donald F. Meeder on behalf
of those indicated pursuant to Powers of Attorney
<PAGE> 165
SIGNATURES
Growth Stock Portfolio (the "Portfolio") has duly caused this
Post-Effective Amendment to the Registration on Form N-1A of The Flex-funds
(File No. 2-85378) to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Dublin and State of Ohio on the 29th day of April,
1996.
GROWTH STOCK PORTFOLIO
By: Donald F. Meeder
----------------------------
Donald F. Meeder
This Post-Effective Amendment to the Registration Statement on Form
N-1A of The Flex-funds (File No. 2-85378) has been signed below by the following
persons in the capacities with respect to the Portfolio indicated on April 29,
1996.
Signature Title
--------- -----
Robert S. Meeder, Sr.* President and Trustee
- ------------------------------
Robert S. Meeder, Sr.
Milton S. Bartholomew* Trustee
- ------------------------------
Milton S. Bartholomew
Russel G. Means* Trustee
- ------------------------------
Russel G. Means
Donald F. Meeder
- ------------------------------ Secretary/Treasurer, Principal Financial
Donald F. Meeder Officer and Principal Accounting Officer
Walter L. Ogle* Trustee
- ------------------------------
Walter L. Ogle
Philip A. Voelker* Vice President and Trustee
- ------------------------------
Philip A. Voelker
*By: Donald F. Meeder
--------------------------
Donald F. Meeder
Executed by Donald F. Meeder on behalf
of those indicated pursuant to Powers of Attorney
<PAGE> 166
SIGNATURES
Utilities Stock Portfolio (the "Portfolio") has duly caused this
Post-Effective Amendment to the Registration on Form N-1A of The Flex-funds
(File No. 2-85378) to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Dublin and State of Ohio on the 29th day of April,
1996.
UTILITIES STOCK PORTFOLIO
By: Donald F. Meeder
----------------------------
Donald F. Meeder
This Post-Effective Amendment to the Registration Statement on Form
N-1A of The Flex-funds (File No. 2-85378) has been signed below by the following
persons in the capacities with respect to the Portfolio indicated on April 29,
1996.
Signature Title
--------- -----
Robert S. Meeder, Sr.* President and Trustee
- ------------------------------
Robert S. Meeder, Sr.
Milton S. Bartholomew* Trustee
- ------------------------------
Milton S. Bartholomew
Russel G. Means* Trustee
- ------------------------------
Russel G. Means
Donald F. Meeder
- ------------------------------ Secretary/Treasurer, Principal Financial
Donald F. Meeder Officer and Principal Accounting Officer
Walter L. Ogle* Trustee
- ------------------------------
Walter L. Ogle
Philip A. Voelker* Vice President and Trustee
- ------------------------------
Philip A. Voelker
*By: Donald F. Meeder
--------------------------
Donald F. Meeder
Executed by Donald F. Meeder on behalf
of those indicated pursuant to Powers of Attorney
<PAGE> 167
SIGNATURES
Money Market Portfolio (the "Portfolio") has duly caused this
Post-Effective Amendment to the Registration on Form N-1A of The Flex-funds
(File No. 2-85378) to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Dublin and State of Ohio on the 29th day of April,
1996.
MONEY MARKET PORTFOLIO
By: Donald F. Meeder
----------------------------
Donald F. Meeder
This Post-Effective Amendment to the Registration Statement on Form
N-1A of The Flex-funds (File No. 2-85378) has been signed below by the following
persons in the capacities with respect to the Portfolio indicated on April 29,
1996.
Signature Title
--------- -----
Robert S. Meeder, Sr.* President and Trustee
- ------------------------------
Robert S. Meeder , Sr.
Milton S. Bartholomew* Trustee
- ------------------------------
Milton S. Bartholomew
Russel G. Means* Trustee
- ------------------------------
Russel G. Means
Donald F. Meeder
- ------------------------------ Secretary/Treasurer, Principal Financial
Donald F. Meeder Officer and Principal Accounting Officer
Walter L. Ogle* Trustee
- ------------------------------
Walter L. Ogle
Philip A. Voelker* Vice President and Trustee
- ------------------------------
Philip A. Voelker
*By: Donald F. Meeder
--------------------------
Donald F. Meeder
Executed by Donald F. Meeder on behalf
of those indicated pursuant to Powers of Attorney
<PAGE> 168
SIGNATURES
Bond Portfolio (the "Portfolio") has duly caused this Post-Effective
Amendment to the Registration on Form N-1A of The Flex-funds (File No. 2-85378)
to be signed on its behalf by the undersigned, thereunto duly authorized in the
City of Dublin and State of Ohio on the 29th day of April, 1996.
BOND PORTFOLIO
By: Donald F. Meeder
-----------------------------
Donald F. Meeder
This Post-Effective Amendment to the Registration Statement on Form
N-1A of The Flex-funds (File No. 2-85378) has been signed below by the following
persons in the capacities with respect to the Portfolio indicated on April 29,
1996.
Signature Title
--------- -----
Robert S. Meeder, Sr.* President and Trustee
- ------------------------------
Robert S. Meeder, Sr.
Milton S. Bartholomew* Trustee
- ------------------------------
Milton S. Bartholomew
Russel G. Means* Trustee
- ------------------------------
Russel G. Means
Donald F. Meeder
- ------------------------------ Secretary/Treasurer, Principal Financial
Donald F. Meeder Officer and Principal Accounting Officer
Walter L. Ogle* Trustee
- ------------------------------
Walter L. Ogle
Philip A. Voelker* Vice President and Trustee
- ------------------------------
Philip A. Voelker
*By: Donald F. Meeder
-------------------------
Donald F. Meeder
Executed by Donald F. Meeder on behalf
of those indicated pursuant to Powers of Attorney
<PAGE> 169
SIGNATURES
Short-term Global Portfolio (the "Portfolio") has duly caused this
Post-Effective Amendment to the Registration on Form N-1A of The Flex-funds
(File No. 2-85378) to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Dublin and State of Ohio on the 29th day of April,
1996.
SHORT-TERM GLOBAL PORTFOLIO
By: Donald F. Meeder
--------------------------------
Donald F. Meeder
This Post-Effective Amendment to the Registration Statement on Form
N-1A of The Flex-funds (File No. 2-85378) has been signed below by the following
persons in the capacities with respect to the Portfolio indicated on April 29,
1996.
Signature Title
--------- -----
Robert S. Meeder, Sr.* President and Trustee
- ------------------------------
Robert S. Meeder, Sr.
Milton S. Bartholomew* Trustee
- ------------------------------
Milton S. Bartholomew
Russel G. Means* Trustee
- ------------------------------
Russel G. Means
Donald F. Meeder
- ------------------------------ Secretary/Treasurer, Principal Financial
Donald F. Meeder Officer and Principal Accounting Officer
Walter L. Ogle* Trustee
- ------------------------------
Walter L. Ogle
Philip A. Voelker* Vice President and Trustee
- ------------------------------
Philip A. Voelker
*By: Donald F. Meeder
-------------------------
Donald F. Meeder
Executed by Donald F. Meeder on behalf
of those indicated pursuant to Powers of Attorney
<PAGE> 1
EXHIBIT 11
Auditors' Consent
The Board of Trustees of
The Flex-funds:
We consent to the use of our reports included herein dated February 2, 1996 on
the financial statements of The Flex-funds (comprising The Muirfield, Growth,
Total Return Utilities, Bond, Short-Term Global Income, and Money Market Funds),
the Mutual Fund Portfolio, Growth Stock Portfolio, Utilities Stock Portfolio,
Bond Portfolio, Short-Term Global Portfolio and Money Market Portfolio as of
December 31, 1995 and for the periods indicated therein and to the references to
our firm under the headings "Financial Highlights" in each prospectus and "Other
Services" in the Statement of Additional Information.
KPMG Peat Marwick LLP
Columbus, Ohio
April 29, 1996
<PAGE> 1
EXHIBIT 16
THE FLEX-FUNDS
THE GROWTH FUND, THE U.S. GOVERNMENT BOND FUND,
MUIRFIELD FUNDS AND TOTAL RETURN UTILITIES FUNDS COMPUTATION SCHEDULE
Method by which total return (ended redeemable value) is computed:
P (1 + T)n = ERV
P = a hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of one or five periods (or fractional
portion thereof) and since inception
<TABLE>
<CAPTION>
THE GROWTH FUND 1 YEAR 5 YEARS 10.79 YEARS
- ------------------ ------ ------- -----------
<S> <C> <C> <C>
Beginning Account Balances $1,000.00 $1,000.00 $1,000.00
Average Annual Total Return 24.61% 11.38% 8.36%
Ending Redeemable Value $1,246.10 $1,711.79 $2,378.13
</TABLE>
Formula Computation:
<TABLE>
<S> <C> <C> <C>
1 year: $1,000 (1 + .2461) = $1,246.10
5 years: $1,000 (1 + .1138)5 = $1,711.79
10.79 years: $1,000 (1 + .0836)10.79 = $2,378.13
</TABLE>
<TABLE>
<CAPTION>
THE U.S. GOVERNMENT
BOND FUND 1 YEAR 5 YEARS 10.65 YEARS
----------- ------ ------- -----------
<S> <C> <C> <C>
Beginning Account Balances $1,000.00 $1,000.00 $1,000.00
Average Annual Total Return 18.32% 8.58% 7.86%
Ending Redeemable Value $1,183.20 $1,509.21 $2,238.53
</TABLE>
Formula Computation:
<TABLE>
<S> <C> <C> <C>
1 year: $1,000 (1 + .1832) = $1,183.20
5 years: $1,000 (1 + .0858)5 = $1,509.21
10.69 years: $1,000 (1 + .0786)10.65 = $2,238.53
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
THE MUIRFIELD FUND 1 YEAR 5 YEARS 7.40 YEARS
- ------------------ ------ ------- ----------
<S> <C> <C> <C>
Beginning Account Balances $1,000.00 $1,000.00 $1,000.00
Average Annual Total Return 25.82% 14.15% 12.58%
Ending Redeemable Value $1,258.20 $1,938.12 $1,403.33
</TABLE>
<TABLE>
<CAPTION>
Formula Computation:
<S> <C> <C> <C>
1 year: $1,000 (1 + .2582) = $1,258.20
5 years: $1,000 (1 + .1415)(5) = $1,938.12
7.40 years: $1,000 (1 + .1258)(7.40) = $1,403.33
</TABLE>
<TABLE>
<CAPTION>
THE TOTAL RETURN
- ----------------
UTILITIES FUND 0.53 YEAR
- -------------- ---------
<S> <C>
Beginning Account Balances $1,000.00
Total Return 15.00%
Ending Redeemable Value $1,150.00
</TABLE>
Formula Computation:
0.53 year: $1,000(1 + .1500) = $1,150.00
The total return quotations represented above were computed for the periods
ended December 31, 1995.
<PAGE> 3
EXHIBIT 16
THE FLEX-FUNDS
THE U. S. GOVERNMENT BOND FUND
YIELD COMPUTATION SCHEDULE
Method by which yield is computed:
YIELD = 2 [( a-b + 1)6 - 1]
---------
c*d
a = interest earned during the period
b = expenses accrued during period
c = average daily number of shares outstanding during the period that were
entitled to receive dividends
d = maximum offering price per share on the last day of the period
4.82% = 2 [( 77,026 - 13,092 + 1)6 - 1]
-----------------
745,293 * 21.58
Method by which yield is computed:
YIELD = Base Period Return X (365/7)
EFFECTIVE YIELD = [(Base Period Return + 1)365/7 ] - 1
Beginning Account Balance 1.00
Dividend Declaration
December 25 0.00014891
December 26 0.00014863
December 27 0.00014781
December 28 0.00014836
December 29 0.00015028
December 30 0.00015028
December 31 0.00015028
----------
0.00104455
Less: Deductions from Shareholders Accounts 0.00
----------
Ending Account Balance 1.00104455
Less: Beginning Account Balance -1.00
----------
Difference 0.00104455
Base Period Return
(Difference/Beginning Account Balance) 0.00104455
Yield Quotation
(Base Period Return x 365/7) 5.45%
Effective Yield Quotation
[(Base Period Return + 1)x365/7 ] - 1 5.59%
The yield quotations were computed based on the seven days ending December 31,
1995 for the period ended December 31, 1995.
<PAGE> 4
EXHIBIT 16
THE FLEX-FUNDS
TOTAL RETURN UTILITIES FUND
YIELD COMPUTATION SCHEDULE
Method by which yield is computed:
YIELD = Base Period Return X (365/7)
EFFECTIVE YIELD = [(Base Period Return + 1)365/7 ] - 1
Beginning Account Balance 1.00
Dividend Declaration
December 25 0.00014891
December 26 0.00014863
December 27 0.00014781
December 28 0.00014836
December 29 0.00015028
December 30 0.00015028
December 31 0.00015028
----------
0.00104455
Less: Deductions from Shareholders Accounts 0.00
----------
Ending Account Balance 1.00104455
Less: Beginning Account Balance -1.00
----------
Difference 0.00104455
Base Period Return
(Difference/Beginning Account Balance) 0.00104455
Yield Quotation
(Base Period Return x 365/7) 5.45%
Effective Yield Quotation
[(Base Period Return + 1)x365/7 ] - 1 5.59%
The yield quotations were computed based on the seven days ending December 31,
1995 for the period ended December 31, 1995.
<TABLE>
<CAPTION>
THE TOTAL RETURN
- ----------------
UTILITIES FUND 0.53 YEAR
- -------------- ---------
<S> <C>
Beginning Account Balances $1,000.00
Total Return 15.00%
Ending Redeemable Value $1,150.00
</TABLE>
Formula Computation:
0.53 year: $1,000(1 + .1500) = $1,150.00
The total return quotations represented above were computed for the periods
ended December 31, 1995.
<PAGE> 5
EXHIBIT 16
THE FLEX-FUNDS
THE MONEY MARKET FUND
YIELD COMPUTATION SCHEDULE
Method by which yield is computed:
YIELD = Base Period Return X (365/7)
EFFECTIVE YIELD = [(Base Period Return + 1)365/7 ] - 1
Beginning Account Balance 1.00
Dividend Declaration
December 25 0.00014891
December 26 0.00014863
December 27 0.00014781
December 28 0.00014836
December 29 0.00015028
December 30 0.00015028
December 31 0.00015028
----------
0.00104455
Less: Deductions from Shareholders Accounts 0.00
----------
Ending Account Balance 1.00104455
Less: Beginning Account Balance -1.00
----------
Difference 0.00104455
Base Period Return
(Difference/Beginning Account Balance) 0.00104455
Yield Quotation
(Base Period Return x 365/7) 5.45%
Effective Yield Quotation
[(Base Period Return + 1)x365/7 ] - 1 5.59%
The yield quotations were computed based on the seven days ending December 31,
1995 for the period ended December 31, 1995.
